It's been almost two weeks since I formally presented to the Minister of Finance the report of the Commission on the equity share of the Norwegian Wealth Fund (the Government Pension Fund Global). The reason I haven't mentioned this in this blog yet is partly that I've been busy (lame excuse), but partly also because I'm so sick of the work in that Commission I want to put it behind me. As is by now well known, I was the only member of the Commission recommending a reduction in the equity share from 60% to 50%. For the Commission chair to be the lone dissenting voice may not be usual. But then I guess I've never strived to be a usual person.
Although I now want to put this stage of my work behind me, I feel like clarifying a couple of points that, judging from media reports, may have been misunderstood. Some people seem to think that I recommended less risk taking because I didn't believe the politicians can be trusted to handle greater risk, in particular, that they would be unable to cut spending should the fund make big losses. That was not my point at all. Rather, it was that I find it undesirable for government spending to move up and down in tandem with the movements in global equity markets. There is plenty of research emphasising the desirability of stability and predictabililty in government services as well as tax rates. Thus, my stance is not question of politicians' "stamina" (if I may borrow a term from a certain presidential candidate), but of what serves people best.
The other point is that it is rather difficult to discuss investment strategies without also discussing how the fund should be used. Once you start thinking about it, it should be rather obvious that strategies for risk taking and draws on the fund should be determined simultaneously based on the owners' preferences and the financial and economic environment. Before I received the question to head this Commission I started to work on the analytical issues involved in such decisions. So far, it has resulted in a joint paper with Snorre Lindset at NTNU, available upon request. I hope to continue this work as I now can turn to other tasks.