| dc.description.abstract | Is the stock market overpriced? Is it time to sell? Most of the asset pricing research
has been directed towards stochastic discount factors, without definitive answer. We study the
case of the Norwegian Government Pension Fund Global, a large institutional investor that
cannot easily undertake large strategy shifts, hindered by market depth. However, the fund can
enjoy diversification benefits and seek alternative allocations. We review the Fund’s
management performance and analyse two asset classes: Private Equity and Infrastructure.
Private Equity describes a range of companies to be acquired but also a managerial and
capitalistic structure. Infrastructure only refers to a category of real assets to be targeted, some
of which are managed as private equity.
Our findingsindicate that deep structural reforms are needed to enable efficient internal
active management of the Fund. The buyout and growth segments of private equity could then
be quickly added to the GPFG’s investment universe and invested through Separately
Managed Accounts. The SMAs model provides much flexibility and can be adapted as the
GPFG’s management acquires more experience and seek to internally manage the assets.
Renewable electricity production is the most attractive segment within infrastructure. Internal
competence could be quickly more acquired than for private equity, and the class seems
suitable for SMAs.
We exclude other infrastructure categories because of their exposure to political risk
and return profile. Emerging markets should be included in the investment universe for both
private equity and infrastructure. Despite the high level of risk linked to frontier markets, we
suggest letting in the not-so-distant future the GPFG seize opportunities in these markets and
review mitigation strategies proposals.
Finally, we argue that the fund’s active management strategy should be shifted from
asset selection towards value-adding ownership. | nb_NO |
