Another in a series of “When supposedly smart people say silly things”

Yesterday’s story on Bloomberg about the Norwegian Pension Fund Global (usually called the Oil Fund) invested in Greek debt raised some eyebrows.  I’d like to thank a tweet from Norges Bank for directing me to the story.

I‘ve previously praised the Norwegian Finance Minister for suggesting that major financial institutions here should make low cost index funds available to the public but sadly he let himself down on this occasion.  In the article it quotes an interview he gave as follows:
“One could say we are investing for infinity,” Johnsen said in an Aug. 27 interview. “It is important when you look at the time scope of the fund and the investments that there should be a portion of active management.”
If that investing is focused outside the liquid capital markets perhaps he has an argument but when the fund’s use of active management has been shown to add no value surely this must be a mistake.  Just because you’ve got a long time frame doesn’t mean you should take unnecessary risks!  The fund has a duty to protect the wealth accumulated on behalf of the Norwegian people and in this humble blogger’s view should be avoiding unnecessary risks.
The emphatic nature of the support for the buying of Greek debt raises questions other than the active management one an potentially more insidious.
Is this buying of Greek debt Norway’s way of supporting Greece politically?  If so the Pension Fund is surely the wrong way.  My wife and daughter are Norwegian citizens and as such have a partial claim on the fund.  The fund managers NBIM should not be playing political games with taxpayers’ money.  They cannot know that these bonds are appropriate for the job of long term preservation of capital and purchasing power.
The other more worrying question is the high level of conviction in the buying.  Does Norges Bank know something the rest of the market doesn’t?  I don’t know but I throw the question out there and ask the reader to make up their mind.
The emphatic nature of the support for the buying of Greek debt raises questions other than the active management which are more disturbing:.
Is this buying of Greek debt Norway’s way of supporting Greece politically?  If so the Pension Fund is surely the wrong way.  My wife and daughter are Norwegian citizens and as such have a partial claim on the fund.  The fund managers NBIM should not be playing political games with taxpayers’ money.  They cannot know that these bonds are appropriate for the job of long term preservation of capital and purchasing power.
The other more worrying question is the high level of conviction in the buying.  Does Norges Bank know something the rest of the market doesn’t?  I don’t know but I throw the question out there and ask the reader to make up their mind.