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(Refiles to add Progess Party in third bullet point)
* Labour against splitting fund
* Conservatives, ahead in polls, want a review
* Opposition Progress Party says fund should be split into smaller funds
OSLO, July 3 (Reuters) - Norway's deputy finance minister has dismissed opposition suggestions that the country's sovereign wealth fund, the world's largest, should be split into smaller funds, a local newspaper reported on Wednesday.
"We fear that a split would lead to an unfortunate competition between funds, which could lead to higher risk-taking and too much weight being put on achieving short-term results," financial daily Dagens Naeringsliv quoted deputy finance minister Hilde Singsaas as saying.
The opposition Conservatives, which polls suggest will win parliamentary elections in September, have said the fund could be separated from the Norwegian central bank, which has managed it since it was set up in 1996.
They have promised to look at alternative ways of managing the oil fund given how large it has become. The fund's investments totalled $719 billion as of Wednesday.
A smaller opposition party, the populist Progress Party, which may end up sharing power with the Conservatives, said on Wednesday it would welcome a reorganisation of the fund.
"We envision a body that administers most of the money, much like today. In addition we would want smaller units specialising in fields like investing in renewable energy and in the world's 50 poorest countries," Ketil Solvik-Olsen, the Progress Party's finance spokesman, told Dagens Naeringsliv.
Solvik-Olsen, a potential cabinet member after the elections, said splitting the fund may be a good idea given its size.
"Today the fund responds slowly to market changes," he said. "It would also create a more dynamic management, which we think is needed. With more units, you can better spread risks."
Singsaas, who belongs to the Labour party, said splitting the fund into several parts would lead to higher costs and pointed to neighbouring Sweden, which has several state pension funds.
"The experience from the Swedish pension funds show that a split-up would lead to higher costs and lead to a focus on short-term results," she said.
Norway's wealth fund invests the country's revenues from oil and gas production for future generations. It is one of the world's largest investors.
The fund made a 5.4 percent return on its portfolio in the first quarter of 2013. (Reporting by Gwladys Fouche; Editing by Terje Solsvik and Susan Fenton)