Spotlight on recent developments in asset management in Norway


All the questions

Overview of recent activity

The Norwegian economy in general, and the asset management industry in particular, is affected by the Norwegian oil extraction and services industry, as well as an active state in financial markets. The State has substantial net financial assets in its sovereign investment fund, the Petroleum Fund (see section VI.v). The economic activity represented by the oil and gas sector benefits the continental and public economy as a whole, and has made Norway (relative to its size) an attractive investment market for foreign asset managers and national.

Norway is, in the context of the EU, still a relatively small market, and the number of Norwegian private fund managers is relatively small, resulting in relatively large variations in fundraising from year to year. other. The year 2020 saw record fundraising levels, with 20 billion crowns, even surpassing the previous record of 2016 (17 billion crowns), with new funds from long-time managers such as FSN and Norvestor.2 In addition, several new funds were raised in different segments, from real estate (eg under Arctic Fund Management and UNION real estate) to seafood (BlueFront Equity). Unlike the high level of fundraising, the level of private equity transactions remained depressed in 2020, possibly due to higher levels of perceived risk and valuation difficulties under covid-19.

The Norwegian mutual fund market is dominated by a small number of large managers, such as the large banks and credit institutions present in Norway (e.g. DNB, KLP, Storebrand and Nordea, together accounting for around 72.5% of the total). The covid-19 pandemic has, over the past year, also spurred significant growth in mutual fund subscriptions, as existing and new investors in the personal segment have favored savings and investments in mutual funds. liquid assets.3 No new hedge funds managed by Norwegian managers have been established since the launch of the Incentive Active Value Fund in 2014. This may be related to the international trend of investors to generally reduce their allocation to hedge funds.

Unregulated funds represent an important part of collective investments in Norway, both in the retail and professional markets. This is particularly the case for real estate investments, which constitute an important asset class in both the institutional investor and retail markets. According to the regulator, these funds were, at the end of 2020, the second type of AIF in Norway with around Kroner 80 billion under management, behind funds of funds with around Kroner 90 billion under management.4

Key trends

i Pressure on costs and fees

Combined with generally low returns in the fixed income markets, market volatility has led investors of all categories to be more aware of the level of fees. In the retail market, the Norwegian Consumer Council focused on a long-standing practice among Norwegian mutual fund managers of charging a success fee without implementing an upper limit, which means that the volatility will benefit the manager and come at the expense of investors. This practice was not present in the institutional market, but large investors increasingly demand lower management fees for all types of funds.

FSAN has forced DNB Asset Management (the asset management arm of Norway’s largest bank) and Nordea to cut fees on some of their “actively managed” mutual fund offerings. The FSAN considered the funds to be “closed-end index funds”, where fees charged to investors offered them no realistic chance of higher returns. Consumer organization Forbrukerrådet has since launched a class action lawsuit against DNB seeking damages on behalf of 150,000 investors. The judgment was appealed to the Supreme Court, which upheld the judgment and awarded damages to the investors.

In 2020, the Norwegian Consumers Council also criticized the same providers for favoring their active management options (and higher fees) to pension plan clients, shifting the retirement investments of individual members towards higher-cost investments. students. Time will tell if this will lead to regulatory action or litigation. The FSAN also reported that it has the insurance legislation to require insurance providers (pension providers) to include their costs in the underlying investments as a cost item in their own disclosure. costs to customers. Presumably, such a requirement would necessitate amending the relevant legislation.

Norwegian occupational pension rules are generally ill-suited to the situation where employees have several employers throughout their careers. The government attempted to remedy this with new rules on retirement accounts for defined contribution plans, whereby pension contributions are allocated to a personal account for each employee, with individual rights to transfer the account between employees. providers (also outside the insurer chosen by the employer), entered into force in 2021. In addition, the government has proposed certain modifications to the rules concerning defined benefit plans presented in June 2021.

ii Persistent legislative delay

As a member of the EEA, Norway is required to implement EU legislation relating to the financial sector. The establishment of the EU financial supervision system in 2011, with the EU supervisory bodies, the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority , which have partly supranational powers, goes against the principle of the EEA Agreement, according to which no sovereignty can be relinquished by the Member States of the EEA. The European Free Trade Association and the European Union have reached an agreement regarding integration into the EU’s financial supervision system, which was approved by the Norwegian parliament in June 2016. However, the agreement involves that each legal instrument must be amended before being incorporated into the EEA Agreement. The high level of change in EU financial legislation since the 2008 financial crisis, combined with the long unresolved issue of supervision, has resulted in long delays in the implementation of several pieces of EU financial legislation. ‘EU in Norway, which the current mechanism does not resolve.

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