The world of investments is no longer only restricted to funds and the investment divisions of the biggest investment banks. In the past, such investors had a huge influence over the capital markets, but over the past few decades, some of the world’s biggest sovereign wealth funds have become extremely influential. Since they invest the money belonging to a country, they have much more money to invest, but at the same time such funds are also cautious. At the end of the day, the money in such funds belongs to the government, and hence, the fund managers have to be extremely cautious with their investments. Norway’s sovereign wealth fund is the most valuable in the world and is currently valued at a mind-boggling $1 trillion. However, the larger the size of a fund, the more cautious it has to be with its capital. The fund is managed by Norway’s central bank, and in a new development, it advised the fund to reallocate capital from its investments in the European markets to those in the United States and the rest of North America.
In this regard, it is important to note that wealth fund has generally been more focused on investments in Europe and generally prefers investments in those nations with which Norway has good trading relations. Traditionally, it has not been as keen with regards to investment in North America. However, that could not change if the fund heeds the advice provided by the central bank.
The fund is formally known as the Government Pension Fund Global and in a statement; the central bank stated that three needs to be more diversification in investments. The central bank stated, “The Bank’s advice is that the geographical distribution should be adjusted further towards float-adjusted market weights by increasing the weight of equities in North America and reducing the weight of equities in European developed markets.” It is a major announcement from the manager of the sovereign wealth fund. Changing investment strategy at a time when the macroeconomic trends are largely a bit chaotic could be a bold move, but it goes without saying that ultimately investments in North America are going to be seen as excellent long-term bets. Moreover, investments in the market by the world’s biggest sovereign wealth fund could also prove to be a huge boost for the overall outlook with regards to the market.