OSLO, June 1 (Reuters) - Norway's $1 trillion sovereign wealth fund voiced opposition on Friday to a proposal by index provider MSCI to adjust the weighting of stocks like Facebook in its indices to account for their unequal voting structures.
The world's largest sovereign fund said the composition of the indices should remain representative of the markets.
The fund made the call in a letter to MSCI, which had sought comment on a proposal it is considering to adjust the index weighting of stocks with unequal voting structures such as Facebook and Google parent Alphabet.
In a letter dated May 31 and published on its website on Friday, the fund said the proposed approach could distort markets by removing some four percent of the market capitalisation of the current MSCI World Index.
"We are particularly concerned about structural changes that would skew the composition of the index, departing from its original principle of objective representation of investable markets," wrote Carine Smith Ihenacho, the fund's chief corporate governance officer.
It said this would limit portfolio diversification for investors that follow the broader index, such as the Norwegian fund, which invested 66.2 percent of its value in equities at the end of the first quarter.
BlackRock Inc, the world's largest asset manager, raised similar concerns last month about MSCI's proposed changes. BlackRock said policymakers, not index providers, should set corporate governance standards.
Shares with unequal voting powers were out of fashion and even banned in some jurisdictions for decades after World War Two.
But in recent years a number of high-profile technology firms, including Spotify, Dropbox, Snap , Facebook and Alphabet, have listed shares with a voting structure that gives lopsided decision-making power to insiders.
"As these types of companies would be weighted down in the index, they would be less represented in 'passive' investors' portfolios," the Norwegian fund said in its letter.
"This would leave portfolios concentrated in more mature companies, in more traditional industries, with dispersed and passive ownership." (Reporting by Gwladys Fouche; Editing by Adrian Croft)