Norway’s regulations have always been a minefield, particularly for foreign asset managers. But these rules could be about to change, as many in the industry are taking matters up with the Norwegian regulator.

As it stands, there are no defined limits on Norwegian investments, apart from caps on alternatives and emerging market equities. There is a 7 per cent limit on alternatives such as private equity, hedge funds, infrastructure and emerging market equities, with each of these limited to 1 per cent. There is also a 10 per cent cap on non-Ucits compliant assets.

Up until this year there was a 35 per cent limit on equities and other ceilings on various funds and types of assets. This changed with a January 2008 reform, which sought to ease investment restrictions. When the new rules came out there was hope that the regulatory framework would be more liberal, but it actually proved to be a major disappointment. The reform has continued to block real access to alternatives and in many ways only gave the funds more leeway with bonds and equities.

Rolf Skomsvold, secretary-general of Pensjonskasseforeningene (the Norwegian Pension Funds Association), has hit out at the reformed regulations, calling them flawed and based on poor logic.

He says: “There were some flaws in the new regulations, partly based on misunderstandings from the ministry. The limit on Ucits funds is meaningless and we hope they will change it. The ministry said it is going to make some changes on this in the near future, so that’s good. But there are a lot of details to the new regulations that must be changed.”

Mr Skomsvold is especially critical of the hedge fund regulation. For a small pension fund, he believes, this rule has made it almost impossible for them to invest in the asset class, and even if they were able to, the amount would be insignificant.

Other possible reforms could be related to the buffers and solvency levels of Norwegian funds as well as rules on administration costs. There has been concern within the industry that funds were not allowed enough flexibility in these areas. Many believe that these assets can be put to better use.

Action could be taken in the next two months. The association is meeting with the regulator and while it is unsure of how much progress will be made, there is a belief that some changes will occur.

Mr Skomsvold says: “We will ask for some changes and technical adjustments that will make the situation a little easier. The government doesn’t want to give us much, so we’re really not sure what response we’ll get.”

However, it is not clear whether or not these reforms have the full support of the industry. While the association would not press the issue without the support of more funds, Bjørn Hamre, director of the NKr202bn (€23bn) Kommunal Landspensjonskasse, does not see the reforms as necessary. One reason could be that his fund managed a small gain of 0.4 per cent in the brutal third quarter.

He says: “In general we are comfortable with the regulatory situation as it is.”

However, reforms certainly have the support of asset managers. Edward Wendel, executive director and head of multi-manager investments at DnBNOR Asset Management says that assets like private equity and hedge funds are in their infancy in Norway, but that a reform like this could really help the industry grow.

He says: “With private equity we’re at

a fairly early stage, but hedge funds are

a bit further along. There isn’t yet a

huge willingness in Norway for

alternatives at the moment as people generally prefer more traditional funds,

property and savings accounts. However, that could change if the regulations

are adjusted.” n

Printer friendly version

Email this article to a friend