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Equities boost Norway’s SWF

The equity allocation of Norway’s Government Pension Fund Global, which amounts to shares in 8,496 companies, was largely responsible for its outperformance in 2010, with the basic materials sector being the best performer for the fund.

The biggest gaining stock investments, measured in krone returns, were Nestlé, Apple and Royal Dutch Shell. The weakest performers were Banco Santander of Spain, oil company BP and Banco Bilbao Vizcaya Argentaria of Spain.

Norges Bank Investment Management, which manages the assets of the large Norwegian sovereign wealth fund, is mandated to have 60 per cent of its assets in equities, invested entirely outside of Norway with a split of 50 per cent of in Europe, 35 per cent in the Americas, Africa and the Middle East, and 15 per cent in Asia and Oceania.

Some of the largest holdings include the German-based Siemens AG, as well as French companies BNP, Axa, Société Généale, Danone, EDG SA, GDF Suez as well as significant holdings in Royal Bank of Canada

The fund also has a number of holdings in China including China Telecom, China Construction Bank and Industrial and Commercial Bank of China. In Asia it has offices in Shanghai and Singapore.

Overall Norges Bank Investment Management invests in roughly 1 per cent of the world’s listed companies, and has a commitment to promoting better standards for corporate governance.

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It has six overarching strategic focus areas for its ownership activities: equal treatment of shareholders, shareholder influence and board accountability, well-functioning, legitimate and efficient markets, children’s rights, climate change management, and water management.

As well as holding shares in 8,496 companies it also held 8,659 bonds from 1,686 issuers at the end of 2010.

About 12 per cent of the fund overall is managed by external managers.

Chief executive of NBIM, Yngve Slyngstad, said the fund benefitted from its long-term approach, as large equity purchases during the financial crisis in 2008 and in the first half of 2009 yielded solid returns.

The fund’s equity holdings returned 13.3 per cent in 2010, measured in international currency, while fixed-income investments returned 4.1 per cent. The overall return was 1.1 percentage points higher than the return on the fund’s benchmark indices. This is the fifth best performance by the fund since it was set up in 1990.

“In a year marked by the European sovereign debt crisis and fears of an economic slowdown in Europe, the fund posted its fifth-highest result ever,” Slyngstad said.

Meanwhile NBIM’s chief investment officer Bengt Enge, recently left the fund after 13 years. Slyngstad will be responsible for the CIO function until a replacement is in place.

In February, Trond Grande was named as the new deputy chief executive. He was formerly chief risk officer, after Stephen Hirsch stepped down from the position in October last year.

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