Norway’s Apparent African Aversion

Ashby Monk

I can’t read Norwegian. But I can read maps. And the map that Norway’s Aftenposten has put together to illustrate the geographic dispersion of GPF-G’s investment portfolio is definitely worth a gander. The map, for which the data is drawn from the 2009 annual report, includes all of the fund’s 10,288 investments aggregated and sub-divided into countries. (Thanks to these guys for a description of this in English.)

In large part, the map confirms what we already know about the GPF-G; that it is a traditional portfolio investor. Accordingly, concentrations of investments are in jurisdictions with large financial markets. Still, one aspect of this map was particularly interesting; it appears that the African continent has been almost entirely passed over. As best I can tell, the GPF-G has only invested in South Africa and (to a much smaller extent) North Africa.

Are there no profits to be had in Sub-Saharan Africa? Isn’t this a region with some benefit for a highly diversified institutional investor? After all, we are all used to hearing about SSA’s uncorrelated returns. For example, during the global sell-offs due to the sub-prime crisis, several of the SSA stock markets, such as Ghana’s, were up. Shouldn’t the biggest investors in the world be interested in this type of exposure? And yet, the GPF-G, one of the biggest investors in the world (full stop), has decided to take a pass on the region; either they don’t have the capacity or they lack interest.

There are good reasons for avoiding Africa, namely high levels of risk and uncertainty. It’s a very difficult environment to try to invest in for profit (remember, investors aren’t philanthropists). It’s for this reason that I initially felt that only emerging market SWFs would take the plunge into Africa. The south-south link gives them considerable experience operating in difficult legal and regulatory environments that are characteristic of this region.

In my view, this just reinforces the importance of some of the initiatives to bring SWF assets into Africa. Specifically, I think the World Bank’s Sovereign Funds Initiative is attractive. (It seeks to direct 1% of SWF capital into Africa via the International Finance Corporation). By acting as a skilled intermediary, the IFC can help overcome some of the constraints above and bring SWF cash into this under-served market. This would be to the benefit of both Africa and the world’s largest institutional investors.

7 Responses to “Norway’s Apparent African Aversion”


  1. 1 rien huizer March 11, 2010 at 11:26 pm

    A little late perhaps, but the associative thinker realizes suddenly that the relevant “distributions” (no not distributions in the pension fund sense) for a fund such as Norway PF are: asset classes, currencies, governance types, shades of industrial ethics and geography in a complicated way. Perhaps geography should be broken down (or replaced entirely, not sure) by issuer jurisdiction, trading (local exchanges and securities supervisors) jurisdiction and area of operation. I know people who invest in emerging market stocks issued in one EM jurisdiction and operating in another EM while listed on an OECD stock exchange, even Oslo’s. Some of these overlap or cancel out etc. The politics of SWFs subject to democratic oversight are not easy. How do you keep future governments from changing the rules? How do you know that your investment is truly ethical? The world has really no experience with the credibility issues embedded in this. It is hard enough to maintain central bank independence (and hence credibility)through the business cycle, but a giant fund is a fed degrees more difficult.

  2. 2 Ashby Monk March 12, 2010 at 11:44 am

    You’re right that it’s hard to track where these investments really exist. I’m reminded of the an investment by CIC in a Hong Kong listed Russian company. Where would that dot show up on the above map I wonder?

    Check out my post today for managing the “temptation” of future governments and politicians. It’s very hard…

  3. 3 rachel March 14, 2010 at 10:18 pm

    That sort of investment would probably show up in the developed market in which it was listed. Actually the CIC’s SEC filing reveals US listed equities including foreign companies (Teck Resources, Anglogold Ashanti, Rio etc).

    Interesting point though. and its worth noting that the GPF-G is still pretty underinvested in Latam, beyond the big markets. I think the point is that the GPF-G is basically not in any of the frontier markets and is only in the larger emerging markets.


  1. 1 Demystifying ADIA « Oxford SWF Project Trackback on March 15, 2010 at 10:07 am
  2. 2 IFC Guides SWFs to the Investment Frontier « Oxford SWF Project Trackback on April 13, 2010 at 11:19 am
  3. 3 Quick Thoughts on GIC’s Annual Report « Oxford SWF Project Trackback on October 4, 2010 at 6:56 am

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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