Norway’s $1 trillion sovereign wealth fund, the world’s largest, should be given longer time to adjust its holdings of stocks and bonds to better exploit differences in return on the two asset classes, the central bank, which manages the fund, recommended.
The fund’s target is to invest 70 percent of its portfolio on global stock markets, and must buy or sell shares to rebalance its holdings if it deviates by more than 4 percentage points.
In the future, the maximum deviation should be only 2 percentage points, the fund recommended, but the rebalancing should be allowed to take place over longer time.
“The combination of a narrower band and more gradual rebalancing means that rebalancing will occur more frequently and be carried out over longer periods than today. Rebalancing will to a greater extent become part of ordinary portfolio management,” Norges Bank said.