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Norway’s government has proposed making the biggest changes to the world’s largest sovereign wealth fund in decades, increasing its risk by investing about $90bn more in stock markets and cutting the amount of oil money it can use in the budget.

The $900bn oil fund should be able to invest 70 per cent of its assets in equities, up from the current 60 per cent, as the centre-right government backed proposals by both the fund itself and an expert group.

The shift, which needs parliamentary approval, would be significant for global markets as the oil fund on average already owns 1.3 per cent of every listed company. The increase in equities would come at the expense of bonds, as the oil fund, which has an investment horizon of a century or more, tries to increase its returns.

At the same time, the Norwegian government is aiming to reduce the amount of money from the fund Oslo is allowed to use in budgets. Under the so-called spending rule introduced in 2001, the government is allowed to take up to 4 per cent of the fund each year – which is meant to be equivalent to the real return from investments. This would be reduced to a maximum of 3 per cent in the future under the new proposal, as the outlook for returns has fallen.

Debate over how much the government should spend has intensified as the fund has grown rapidly – its assets have increased 20-fold since the spending rule was set – and after Oslo took out money from the fund for the first time ever last year as oil revenues plunged.

“The government’s proposals will support a continued, responsible management of the considerable oil and gas resources. Norway has been fortunate, but the petroleum wealth has also been managed well,” said prime minister Erna Solberg.

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