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The world’s largest sovereign wealth fund is calling for emergency reforms in European capital markets, including harmonious taxes, bankruptcy and supervision rules, to ensure the continent does not fall behind even further in competitiveness in the US and Asia.
Norway’s 1.9tn Petroleum Fund is the largest owner of European assets and owns an average of 2.5% of all listed companies on the continent.
However, the share of European equities in total assets has fallen from 26% to 15% over the past decade. This is mainly because they say they are less competitive compared to the US stock market and the Asian blues.
“The working market in Europe is very important to us. … For now, it feels like there’s a sense of urgency (among policymakers). We feel that too. And we’re happy about it.”
The fund responds to the European Commission’s consultation on capital market integration this week, claiming it should be more ambitious and address deeper structural issues that hurt the continent and its multiple national markets.
Marine Norberg, head of market strategy for Norway’s Petroleum Fund: “A well-functioning market in Europe is very important to us” © Norges Bank
“We share concerns that over time the European market has lagged behind in terms of business dynamism and the provision of new investment opportunities for institutional investors,” the letter states.
“Major barriers include national securities laws, corporate laws, and bankruptcy regimes that vary widely across member states.”
The largest holdings in Europe include SAP, ASML, Novo Nordisk, Nestlé and UBS, list where you want to see the action.
These have less national differences between securities and corporate laws and bankruptcy regimes across Europe. Harmony of tax systems, especially harmony for withholding tax. Streamlining debt issuance.
He said that European equity liquidity should be improved through competition and innovation rather than regulation, and that its oversight should be uniform at the European level.
Norwegian politicians reduced the fund’s relative exposure to Europe and boosted the US allocation in 2012, but still remained “overweight” on the continent.
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However, fund executives said the larger factor behind the decline in European investment was structural issues, such as few listed companies in the region.
Performance against US stocks is another issue. US stocks account for 40% of their assets compared to 21% a decade ago.
“We’ve seen a decline in the number of European companies we can invest in over the past few years. We’ve also seen a very significant decrease in the relative AUM (managed assets) size in Europe.”
European tech companies such as Spotify and Klarna will list or list them in the US, while groups such as Linde, CRH and ARM Holdings have moved the list in recent years.
The number of European companies owned by the fund has dropped to 1,546 over the past decade.
Data visualization with Aditi Bhandari
