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The world’s largest sovereign wealth fund is looking for pressing reform of Europe’s capital markets together with harmonised tax, insolvency and supervisory guidelines to make sure the continent doesn’t fall additional behind the US and Asia in competitiveness.
Norway’s $1.9tn oil fund is the largest single proprietor of European property, proudly owning on common 2.5 per cent of each listed firm on the continent.
However the share of European equities in its complete property has fallen from 26 per cent to fifteen per cent prior to now decade, primarily due to what it says is falling competitiveness in contrast with US inventory markets and a few Asian bourses.
“A well-functioning market in Europe is essential to us . . . It looks like there’s a way of urgency proper now [among policymakers]. We really feel it too, and we’re glad about that,” Malin Norberg, chief of market methods on the fund, advised the Monetary Occasions.
The fund will this week ship a response to the European Fee’s session on capital markets integration, arguing it must be extra formidable and handle deeper structural issues hurting the continent and its a number of nationwide markets.
“We share the priority that European markets over time have fallen behind by way of enterprise dynamism and the availability of recent funding alternatives to institutional buyers,” the letter says.
“Key obstacles embody nationwide securities legal guidelines, company legal guidelines, and insolvency regimes that modify considerably throughout member states.”
The fund, whose greatest holdings in Europe embody SAP, ASML, Novo Nordisk, Nestlé and UBS, listed areas the place it needed to see motion.
These included fewer nationwide variations in securities and company regulation and insolvency regimes throughout Europe; harmonisation of tax regimes, particularly for withholding tax; and streamlining of debt issuance.
It stated liquidity for European equities must be improved by competitors and innovation, not regulation, and that supervision must be unified at a European degree.
Norwegian politicians minimize the fund’s relative publicity to Europe and boosted its US allocation in 2012, nevertheless it nonetheless stays “obese” on the continent.
Nonetheless, the fund’s executives stated a much bigger issue behind the drop in European investments had been structural points reminiscent of fewer listed corporations within the area.
Efficiency relative to US equities has been one other situation. US shares now account for 40 per cent of its property, in contrast with 21 per cent a decade in the past.
“Now we have seen during the last years that the variety of European corporations that we’ve been in a position to spend money on has dropped, and likewise the relative AUM [assets under management] dimension that now we have in Europe has additionally gone down fairly considerably,” stated Emil Framnes, the fund’s international head of fairness buying and selling.
European know-how corporations reminiscent of Spotify and Klarna have listed or are planning to listing within the US, whereas teams reminiscent of Linde, CRH and Arm Holdings moved their listings there in recent times.
The variety of European corporations owned by the fund has fallen by 1 / 4 prior to now decade to 1,546.
Information visualisation by Aditi Bhandari
