| Norway’s sovereign wealth fund is large (Ministry of Finance 2013). At $890 billion, it is the largest sovereign wealth fund in existence, holding over 1% of almost every listed stock in the world. However, as the fund approaches $180,000 for every man, woman, and child in Norway, there have been calls to reassess the way it is managed – from divesting oil and gas stocks to reducing the amount spent each year.
Recent research provides some support for these calls, by treating above- and below-ground wealth as two sides of the same coin for the first time (van den Bremer et al. 2014). At present, Norway has designed its fund according to the principles of modern portfolio theory. These principles would see Norway construct a highly diversified equity portfolio, choose the size of that portfolio based on its risk preferences, and consume a fixed proportion of the fund’s assets each year (Merton 1971)...............................................Full Article: Source
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