Norway’s wealth fund returns 4.7%
The Government Pension Fund Global gained 167bn kroner (€22.7bn) in the period, Oslo-based Norges Bank Investment Management said yesterday.
That compares with a decline of 2.2% in the second quarter. Equity holdings returned 6.5% last quarter, while bonds gained 2.2%. Real estate investments returned 2.7%.
“The result was largely driven by a rally in global stock markets,” Yngve Slyngstad, chief executive officer of NBIM, which manages the fund, said in a statement. “Stocks gained the most in Europe, where the fund has about half of its share-holdings.”
Stocks rose after European Central Bank Governor Mario Draghi pledged in July to do “whatever it takes” to save the euro and later unveiled a bond-buying programme to bring down interest rates.
The US Federal Reserve announced a third round of quantitative easing to stimulate the world’s largest economy, adding to investor optimism.
The MSCI World Index of stocks rose 6% in the third quarter, while the benchmark Stoxx Europe 600 Index has rallied 17% from a Jun 4 low. Asian stocks also gained in the third quarter amid stimulus measures from Japan to China.
Europe’s largest stock investor, which gets its capital from Norway’s oil revenue, is struggling to meet a 4% return target after interest rates plunged to record lows and global stock markets failed to retrace a 2007 peak.
“We’ve had a good return on our bond portfolio the last few years, but we currently have a yield of just above 2%,” Slyngstad said.
“With that premise, the return you can expect in the next few years will of course be at best moderate.”
Norway’s government deposited 80bn kroner of oil revenue into the fund in the quarter. The fund’s result missed by 0.03 percentage point the benchmark set by the Finance Ministry.
“Two thirds of our bond portfolio now has a running yield of less than 2%, and only a quarter has a running yield of more than 3%,” Slyngstad said in the interview.”
— Bloomberg
