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Norwegian selectors ‘ashamed’ by sovereign fund’s Saudi stance

The world’s largest fund is set to more than double its investments in Saudi Arabia despite Khashoggi killing


David Robinson

A majority of Norwegian fund selectors and managers surveyed at Expert Investor’s event in Oslo last month said they were “ashamed” that the country’s sovereign wealth fund planned to significantly increase its investments in Saudi Arabia following the killing of Saudi journalist Jamal Khashoggi.

The €850bn sovereign wealth fund – the largest fund in the world – is set to more than double its investments in Saudi Arabia after the Gulf kingdom’s stock market is included in the fund’s reference index, the FTSE, in March next year.

Khashoggi was killed after he entered the Saudi consulate in Istanbul in October amid widespread speculation the murder was ordered by the Saudi leadership, provoking an international outcry and calls to limit trade with Riyadh.

Three-fifths of attendees surveyed (59%) said it was “outrageous” that Norway was increasing its support for the Saudi regime so soon after the murder and they felt “ashamed” by the fund’s actions.

However, 41% of attendees said it was “not a problem” that the sovereign wealth fund was ramping-up its investment in the kingdom because at the end of the day, the fund invests in companies, not countries.

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Norway’s sovereign wealth fund presently has Saudi assets of about 6.9bn krone (€710m) invested in 42 companies in a variety of sectors including banks, petrochemicals and healthcare.

“Our investments in companies based in Saudi Arabia will not be changed based on political developments,” Yngve Slyngstad, the fund’s chief executive, told Reuters in November.

However, the Oslo government did suspend new licenses for arms exports to Saudi Arabia last month in response to Khashoggi’s killing as well as Saudi involvement in the conflict in Yemen.

Expert Investor Oslo, November 2018

Governance push supported

Norway’s sovereign wealth fund has, however, taken significant steps in recent months to reform corporate governance, arguing that non-executive directors should sit on no more than five boards, while chairmen should not chair another company, in a move that received much more vociferous support from Norwegian fund selectors.

The fund – which owns on average 1.4% of every listed company in the world – has set out a framework to ensure a majority of independent directors have “fundamental” industry insight, while at least two should have worked in the industry of the company.

It is also pushing the view that chief executives should not be chairmen of the same company – as is common at many large US groups, including Amazon, Bank of America and Morgan Stanley – as it steps up its efforts as an active shareholder.

The fund, which channels Norway’s revenues from oil and gas production, hopes such efforts will ensure more effective oversight and controls, particularly with regard to monitoring management performance and executive remuneration.

An overwhelming majority of attendees (86%) at Expert Investor’s Oslo event said the fund’s efforts to reform corporate governance represented a “a much-needed change”.

However, 7% of attendees criticised the move as “unnecessary meddling that will hurt business” while a further 7% said they did not care.

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