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Oct 08

Norwegian pension fund targets more U.S. companies

Posted by Ron F in managementinvestmentscompaniesbailout

Ron F

Anyone who thinks sovereign wealth funds are passive, long-term investors ought to think twice as a result of this development.

But contrary to this take on the topic, what's happening is entirely to be expected. As managers of the Norwegian state pension fund with significant equity holdings, Norges Bank Investment Management is seeking to have four U.S. companies split the role of CEO and chairman, including Harris Corp., Clorox, Parker-Hannifin, and Cardinal Health, after getting Sara Lee to do just that.  

What's more, as Edwin Truman of the Petersen Institute for International Economics has pointed out, the distinction that Reuters' Alexander Smith draws between Norway's fund and Calpers is a false one. In both cases, government ultimately calls the shots. In fact, there are those who argue that U.S. state pension funds are more susceptible to political influence.

As Truman says, the real issue is whether the funds are run in a sufficiently transparent way for them to be accountable to their primary stakeholders, that is, the taxpayers of their countries.

Of course, one may question whether governments should be influencing the management of private companies. But in light of the U.S. bailouts of AIG and the country's biggest banks, the bigger question is how they should be running the show.

And on that question, it seems to me that Norway's SWF, like Calpers, is doing a much better job than the U.S. Treasury or Federal Reserve.

Is the comparison too much of a stretch? Not the way Truman sees it. "For the most part," he wrote in the paper published in August 2008 on the website, SWFs "are merely recyclers of global financial flows. In this respect, they do not differ from central banks and other government-controlled entities or from private sector investors. The only issues are where they invest, how wisely those investments are made, and how accountable the investors are for their decisions."

Sounds to me as if Ben Bernanke and Tim Geithner could learn something from NBIM.

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