Norway's Sovereign Wealth Fund Buys Eurozone Bonds

(September 10, 2010) — Norway’s government pension fund, the second-largest sovereign wealth fund in the world with around $450 billion under management, has indicated that it has purchased Greek debt and bonds issued by the governments of Spain, Italy and Portugal.

The purchase reflects positive news for the eurozone markets after a volatile week. A spokesman for Norway’s central bank, which runs the sovereign wealth fund, told the Financial Times: “We are buying the bonds of the peripheral eurozone countries and stepped up the purchases in the second quarter.” The world’s second-biggest private bond fund, the Pacific Investment Management Co. (PIMCO), has said it remains hesitant to buy peripheral debt as a result of the risks over a Greet default, the FT reported.

Norway Finance Minister Sigbjoern Johnsen said Norway’s long-term investing strategy would guard it from losses. He has said he supports the strategy of stocking up on Greek debt, as well as bonds of Spain, Italy and Portugal, which contributed to a 3.4% loss on European fixed income in the second quarter, compared with gains on bonds in Asia and the Americas. Bloomberg reported that the fund’s CEO, Yngve Slyngstad, revealed the Greek bond holdings in an August interview.

Earlier, in an interview with ai5000 featured in June, Slynstad commented on bond purchases, but made no indication of this move to purchase eurozone bonds. “We have 62.4% of our portfolio invested in equities, so we’re not going to increase our equity purchases in 2010 to any significant degree,” he stated. “We are reducing our bond exposure and increasing our real estate allocation from 0% to 5% over the course of the next two years…In one sense, it’s a challenging environment for investing. We have to be prepared for it to be highly volatile. At the same time, we are quite confident with our investments and portfolio. Confident but cautious.”