* Norway fund is world's largest SWF
* Invests in stocks, bonds, property abroad
* Graphic: http://tmsnrt.rs/2tskfub (Adds comments, background)
OSLO, April 10 (Reuters) - Norway's $1 trillion sovereign wealth fund, the world's largest, should not be given permission to invest in unlisted companies, the Finance Ministry said in recommendations to parliament on Tuesday, rejecting the fund's own advice.
The fund invests Norway's oil and gas revenues into stocks, bonds and property abroad, and is one of the world's biggest shareholders with stakes totalling 1.4 percent of all listed companies.
"Unlisted equity investments would challenge the management model based on transparency, low management costs, and a limited degree of active management," the Finance Ministry wrote in its annual white paper on the fund to parliament.
The fund has argued that investing in unlisted shares, primarily via private equity, could help improve its balance between risk and return, naming Uber and Airbnb Inc among missed opportunities due to the current restrictions.
"We are concerned about the reputation of the fund. Openness is very important for the fund's legitimacy, its trust," Finance Minister Siv Jensen told reporters.
"It is very likely that the lack of (public) information in those types of investments would be problematic."
The fund already has permission to take stakes in companies that have a clear intention to list, which it can still exploit, the ministry said.
The Re-Define think-tank, which has previously called for the fund to invest in private equity, said parliament should overrule the minority centre-right government.
"For a fund with the large size and long-term horizon of Norway's Oil Fund, it is important to be able to invest in economic opportunity and growth, whether they are captured by listed securities or not," said Re-Define Managing Director Sony Kapoor.
In November the fund recommended to drop oil and gas stocks from its equity benchmark index to reduce Norway's exposure to oil price fluctuations, a proposal that sent energy stocks lower at the time.
The finance ministry said on Tuesday it would present its assessment of the proposal in the autumn of 2018.
The Finance Ministry said it would consider whether to allow the fund to take direct stakes in unlisted renewable energy infrastructure projects, but only as part of the fund's present environmental mandate. Those investments amounted to 75 billion crowns ($9.59 billion) at end-2017, said the white paper.
"The assessment will be based on the same requirements for transparency, return and risk that apply to other investments in the fund," said Jensen.
Norwegian life insurer KLP, with $85 billion of assets under management, welcomed the decision.
If parliament went ahead, "the pension fund will benefit from a better, more diversified portfolio with long-term, stable cash flows," said KLP Chief Executive Sverre Thornes.
"In addition, a dramatic increase in investments in renewable energy is necessary in order to reduce global emissions to levels aspired to in the Paris agreement.
Others were disappointed.
"It is becoming close to embarrassing that the finance ministry continues a process of 'assessing' and not be able to make a decision," said Marius Holm, head of the Norwegian green group ZERO, noting that the ruling Conservatives voted in favour of such a move on Saturday.
($1 = 7.8190 Norwegian crowns)
(Reporting by Gwladys Fouche Writing by Terje Solsvik Editing by Ole Petter Skonnord, Keith Weir and Raissa Kasolowsky)