$1tn Norway fund raps FCA over Aramco

World's largest sovereign wealth investor takes aim at London's open arms approach to the Middle Eastern oil giant

18/10/2017 10:07 AST

The world's largest sovereign wealth fund has criticised the UK financial regulator over its controversial efforts to tempt Saudi Arabia's state-owned oil company to London.

Norges Bank Investment Management, which runs Norway's $1tn oil fund, has attacked the Financial Conduct Authority over its proposal to change stock-market rules to accommodate Saudi Aramco, which wants to go public next year with a mooted $2tn deal.

The Norwegian fund, which owns owns more than $660bn-worth of shares in over 9,000 companies globally, said the move was a "step back" in terms of investor protection.

Saudi Arabia wants to list 5% of Aramco but existing rules for blue-chip companies looking to float in London require 25% of a company's shares to be available to the public. The proposed rule changes, aimed at making it easier for sovereign-owned companies to list, have raised fears about investor protection.

Norges Bank Investment Management said the UK's existing rules should be upheld: "These were introduced to provide the necessary checks and balances to protect the interests of minority shareholders from potential abuse," it said.

Aramco will list in its home market but is also on the hunt for an international venue, a decision that has seen London and New York - among other cities - compete fiercely to court the oil company.

For the UK in particular, winning such a high-profile listing would be a boost to London's standing as a global financial hub as uncertainty grows over Britain's impending exit from the European Union.

The Financial Times reported last week that Aramco is considering "shelving" its international IPO plans, and is looking instead at private investment from an unnamed Chinese investor. However, the company later tweeted this was not the case. "[The] IPO process is on track for 2018," it said.

Allianz Global Investors was one of a number of large investors to rule itself out from buying into what would be the world's largest-ever share sale when news of the potential rule change first came to light in July. Rohan Murphy, who sets Allianz GI's policy on energy stocks, told Financial News: "[Being a minority investor] has historically not been a good position to be in."

In its response to the FCA's consultation on changing Britain's listing rules, Norges Bank Investment Management said: "Without safeguards, a controlling shareholder could be in a position to take measures that are not aligned with the long-term interests of either the company or other investors.

"We believe the FCA should consider a more balanced approach."

The FCA declined to comment on Norges Bank Investment Management's response, although at a dinner hosted last night by the Investment Association, the lobby group for fund managers, the FCA's chief executive Andrew Bailey said: "To pick an argument about whether we should or should not meet people who want to operate within the UK regime is in my view to pick the wrong argument."

The oil fund, which began investing in 1996, reached the $1tn-mark in terms of assets under management last month.

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