Norway’s sovereign fund hit record in first half 2017

7 years ago - Published in Finance, Fundamental Analysis

Norway's sovereign-wealth fund, the world's biggest, topped a $1 trillion valuation after the best half-year return in its history.
In the first half of 2017, the Government Pension Fund Global (GPFG) made 499 billion kroner ($63 billion), a 2.6% return on its investments, the best half-year return in its history, the fund announced on Tuesday.

The fund is the largest of its kind in the world with assets under management worth 8.02 trillion kroner ($1.013 trillion). Created on the back of the Scandinavian country’s oil riches to provide Norwegians with a pension, it outstrips its Middle Eastern oil-fueled counterparts in size.

In the second quarter of 2017, the fund returned 202 billion kroner ($25.5 billion). It held 65.1% of its investments in stocks, bringing home 3.4% in returns. However, its equity mandate was increased to 70% in December 2016, and the fund isn’t yet done following through.

Nestlé, China's Tencent and Swiss company Novartis made the biggest positive contributions across the quarter. while General Electric, AT&T and IBM were identified by fund administrator Norges Bank as having made the biggest negative impact.

Norway passed the milestone despite pressure faced by sovereign-wealth funds around the world. Ultralow interest rates are crimping returns and cheap oil is cutting into the income of the largely resource-dependent countries rich enough to possess such funds.

"The stock markets have performed particularly well so far this year, and the fund's return in the two first quarters was 6.5%," Trond Grande, deputy chief executive officer of Norges Bank Investment Management, said.

"We cannot expect such returns in the future,” said Trond Grande, deputy CEO of the fund’s management company. “The record-high return is primarily due to the fact that the fund has become so large.”

At the end of June, the GPFG had 65.1% of assets invested in equities, 32.4% in fixed income and 2.5% in unlisted real estate.

Compared to the end of the first quarter, this means the proportion of equities rose slightly, the fixed-income allocation contracted and the real estate allocation was unchanged.