By Lauren Bailey
The Norwegian parliament has greenlit $1.4B (NOK$15B) in seed funding — with the potential to increase assets to $3.0B (NOK$30B) — to establish a new sovereign wealth fund that prioritizes investments in Nordic companies.
Indeed, as the World Economic Forum warns of a weakening global economy, countries are increasingly adopting a home bias when it comes to institutional investing, in a bid to infuse capital into their respective economies.
Folketrygdfondet, the investment manager of the $4.4B (NOK$44B) Government Pension Fund Norway (GPFN), is charged with steering the investment strategy of the new small-cap equities fund, otherwise known as the Government Fund Tromsø (GFT).
Lawmakers want to see a well-oriented fund that will invest in all listed equities in the small-cap segment, said Kjetil Houg, Folketrygdfondet’s chief executive officer, in an exclusive interview with Markets Group. “When we invest . . . we typically will look at the portfolio construction from a very bottom-up lens. We start by analyzing the companies, and we try to find the best ideas, regardless of sectors and teams. From time to time, we are able to identify trends in the market or background themes that we think will impact the portfolio construction, but the starting point is a bottom-up analysis, regardless of sectors and geography.”
The choice to launch with a focus on public equities was a necessity to ensure adequate liquidity for ideal pricing, given the current market constraints, said Houg, noting a narrow scope could enable the new fund to hit the ground running while on equal footing in an investment universe that includes quality Nordic companies.
“I think that private markets would be more challenging, less efficient, and more expensive,” he said. “We need private markets, of course, but we need public markets even more. And I also think that the Nordic universe is extremely interesting. It has a lot of good companies, both in the large-cap and the small-cap segments.”
Houg pointed out many foreign investors have demonstrated interest in the Nordic public market due to its reputation for being well-regulated and efficient. The universe includes roughly 350 investable companies in the small-cap segment, such as Denmark’s ISS A/S, a global facility management company; Finland’s Huhtamäki Oyj, a global sustainable food packager; Sweden’s OEM International, a technology trading company; Ambu, a Danish organization that specializes in healthcare device and diagnostics solutions; and various pharmaceutical companies. He added that many of its listed companies are still quite big in size and are ideal liquid instruments.
As none of the companies constitute a large share of the index, there is less chance for over-concentration, Houg noted. “The largest company in the index that we will follow constitutes less than 3% of the total universe. So, it’s a less-concentrated universe compared to the S&P500, which is quite remarkable.”
While the mandate outlines a focus on listed equities, Houg noted the fund does have the option to consider unlisted equities if the companies have a very clear intention of listing in the near future.
Folketrygdfondet’s team has assembled a group of five key executives to execute the GFT’s investment strategy. The common denominator is that they are young and ready to bring different perspectives to the table, said Houg. Two are from the Tromso area while the others will move to Tromsø from London and Oslo.
Their financial backgrounds each bring a different expertise to the fund, which Houg noted will foster a collaborative approach. “They’re all very interested, of course, in finance and in asset management and are very dedicated to creating a good and agile team that will deliver over time.”
