Norway’s $840bn sovereign wealth fund turns net seller of stocks
March 4, 2014 Leave a comment
February 28, 2014 2:41 pm
Norway’s oil fund turns net seller of stocks
By Richard Milne in Oslo
Norway’s oil fund was a net seller of equities in the fourth quarter for the first time in its history even as surging share prices pushed the world’s largest sovereign wealth fund to its second best annual performance.
The $840bn fund cut its exposure to equities significantly in the last three months of 2013, from 63.6 per cent to 61.7 per cent of assets.
That was despite its equities portfolio returning 26.3 per cent last year, lifting the fund’s overall return to 15.9 per cent, second only to 2009 since the fund was started 18 years ago.
The oil fund is one of the most closely watched investors in the world as it on average owns 1.3 per cent of every listed company globally. Its biggest holdings at the end of 2013 included Nestlé, Royal Dutch Shell, Novartis, HSBC and Vodafone. Others in its top 10 holdings include BlackRock, Apple and BP.
The rise in share prices in 2013 indirectly led to its selling of equities. The oil fund has an automatic rebalancing mechanism for its benchmark index, which is triggered when equities account for more than 64 per cent of the allocation. That happened for the first time ever at the end of September, triggering an automatic return to a 60 per cent weighting for equities in the benchmark at the end of October.
“The adjustment of the actual portfolio will take place over a longer period, but the fourth quarter of 2013 was still the first in the fund’s history when we sold more shares than we bought, and this was despite significant inflows of new capital to the fund,” the fund said in its annual report.
Yngve Slyngstad, the fund’s chief executive, confirmed to the Financial Times that the forced selling was ongoing.
The result is that the fund’s allocation to bonds increased from 35.5 to 37.3 per cent during the fourth quarter despite Mr Slyngstad’s stated concerns about future returns from fixed income after the suppression of yields due to quantitative easing.
He said on Friday: “We have said before and I can repeat that we are not enthusiastic about bond markets. However, we do see a higher real rate, as reflected in the inflation-linked market, today than we did a year ago.”
He pointed to a “surge” in real rates in the US by more than a percentage point and slightly less in the eurozone, adding: “We have had a significant repricing of the bond market.”
Mr Slyngstad said the fund had sold down some of its stakes in coal and gold miners as part of its review of environmental impact. His comments come as Norway’s governing coalition said it would examine whether to stop the fund from investing in oil, gas and coal companies altogether.
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