Norway fund plans to more than double investments in Saudi Arabia

Norwegian sovereign wealth fund (SWF) CEO Yngve Slyngstad in this 2017 file photo. (Reuters/File Photo)
Updated 26 October 2018
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Norway fund plans to more than double investments in Saudi Arabia

  • Norway's sovereign wealth fund, the world's largest, plans to more than double its investments in Saudi Arabia
  • The fund currently has Saudi Arabian assets worth $825 million

OSLO: Norway's sovereign wealth fund, the world's largest, plans to more than double its investments in Saudi Arabia after it is included in the fund's reference index soon, Chief Executive Yngve Slyngstad said on Friday.
The fund currently has Saudi Arabian assets worth 6.9 billion crowns ($825 million), spread over 42 companies including banks, petrochemicals and healthcare firms.
The fund's reference index, the FTSE, will include Saudi Arabia in the coming year.
"We invest in companies, not countries. Our investments in companies based in Saudi Arabia will not be changed based on political developments," Slyngstad told Reuters.
"Generally speaking, we are not set up to assess political risk."
Earlier, the $970 billion fund said it would ask the 9,000 companies in which it invests to ensure their board members had sufficient expertise, time and independence.
The fund, which funnels Norway's revenues from oil and gas production, owns 1.4 percent of all globally listed shares. It has in recent years become a more active shareholder as it has grown in heft.
While some of the demands put forward on Friday are not new for the fund - such as opposing CEOs who sit as chairs of their companies - others are, such as requiring industry expertise from directors.
A majority of independent board members should have "fundamental industry insight" and at least two of the independent members should have worked in the company's industry, said the fund.
"It is really ... industry expertise which is an issue that has been under-communicated from investors," said Slyngstad. "The strong desire to have a profitable company by having a board who knows the business."
He declined to name specific sectors where he thought board industry expertise was lacking, but said: "There has been a focus on the financial sector, also from regulators, which we will reinforce from our point of view.
"But this is a broader issue than just the financial sector," he added. "We have seen quite differing practice in different sectors and different countries.
"This is a signal that ... we will try to look at these issues more quantitatively, to see where we can find the major issues with regards to countries and sectors."
The position papers will form the basis of the fund's position for how it votes on the boards of companies.
"It will be a starting point for how we will vote," Chief Corporate Governance Officer Carine Smith Ihenacho told reporters earlier.
Asked whether the fund would divest from reluctant companies, on these issues, she said: "It will be a basis for voting, dialogue and engagement."
Directors should also ensure they have enough time to fulfil their obligations to the boards on which they serve, said the fund.
In practice, that means board members of listed companies should not serve on more than five boards at one time and the chair of a leading company should generally not chair the board of another company, it said.
In the third quarter, the fund made a return of 2.1 percent, helped by rising North American stocks. It still returned 0.2 percentage points less than the a benchmark index set by the Norwegian Finance Ministry.
"The market development was affected by expectations of differing economic growth and uncertainty about the effects of increased trade barriers," Slyngstad said.


Head of Saudi Arabia’s SRC: ‘Ask banks for a mortgage, and we will refinance it’

Updated 25 April 2019
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Head of Saudi Arabia’s SRC: ‘Ask banks for a mortgage, and we will refinance it’

  • SRC CEO Fabrice Susini: One of our key objectives is to ensure that the banks are extending loans to more and more people
  • Extending home-ownership is one of the cornerstones of the Vision 2030 strategy to diversify the economy away from oil production

RIYADH: The head of the state-owned Saudi Real Estate Refinance Company (SRC) has made an unprecedented offer to the Kingdom’s home-seekers to underwrite future mortgages.
Speaking at the Financial Sector Conference in Riyadh, Fabrice Susini, SRC CEO, told the audience: “Ask them (the banks) for a mortgage, and we will refinance it.”
Although Susini later clarified his remarks to show that he still expected normal standards of mortgage applications to be met, the on-stage show of bravado illustrates SRC’s commitment to facilitate home-ownership in the Kingdom.
“Obviously if you have no revenue, no income, poor credit history, that will not apply. Now if you have a job, it is different. We have people in senior positions at big foreign banks that could not get a mortgage,” he explained.
He said that Saudi banks have traditionally assessed mortgages on the basis of “flow stability” of earnings. Government employees, or those of big corporations like Saudi Aramco and SABIC, found it easy to get mortgages “because you were there for life.”
“One of our key objectives is to ensure that the banks are extending loans to more and more people. The government is pushing for entrepreneurship, private development, private jobs. If you work in the private sector and cannot get a mortgage the next thing you will do is go to the government for a job,” Susini said.
Extending home-ownership is one of the cornerstones of the Vision 2030 strategy to diversify the economy away from oil production. Saudi Arabia has one of the lowest rates of mortgage penetration of any G20 country — in single digit percentages, compared with others at up to 50 percent.