Martin Skancke, Director General of the Asset Management Department in the Norwegian Ministry of Finance, spoke in the House of Representatives on March 5th. Skancke delivered his testimony concerning the Norwegian sovereign wealth fund in an open hearing during a joint session of two House Financial Services subcommittees.
3/7/2008 :: Skancke was joined by representatives of Canadian and Singaporean funds, and it was the first time representatives of foreign funds appeared in a hearing of this kind. Sovereign wealth funds are investment funds owned by national governments. There has been some concern among American politicians over the growth of investments by such funds in the US. Norway was invited to the hearing to explain the nature of the Norwegian sovereign wealth fund, its mandate and its level of transparency.
The Norwegian sovereign wealth fund is called the Norwegian Pension Fund - Global. As the name indicates, the purpose of the fund is to ensure that today’s oil revenues will also benefit future generations. This is especially important since Norway has an aging population. Skancke emphasized that the fund serves purely as a financial investor and has no strategic holdings. The Norwegian sovereign wealth fund is often mentioned as an example of best practice concerning transparency.
Skancke also emphasized the benefits for the US of investments by sovereign wealth funds. He pointed out that such funds can in fact create stability in the US market. Sovereign wealth funds are stable investors with long-term ambitions, and cannot be forced by capital requirements or investor withdrawals to liquidate positions rapidly.
The US is the biggest recipient of investment by the Norwegian Pension Fund - Global. Skancke explained that this is not only due to the size and importance of the US market, but also due to “our confidence in the long-term potential of this market. We are not running from the market in these turbulent times, but are building up our portfolio based on the long-term view”.
U.S. Representative Luis V. Gutierrez (D-IL), Chairman of the Subcommittee on Domestic and International Monetary Policy, Trade and Technology, said in his closing remarks that the US should look more into foreign sovereign wealth funds to learn how the various governments plan to take care of their aging populations through these funds.
To learn more about The Norwegian Pension Fund, click on the links listed on the right hand side.