Norway’s SWF Sees Green Shoots After Market Downturn, Posts 3.9% Q1 Return

Yngve Slyngstad, head of Norges Bank Investment Management, the central bank’s asset management arm, said he sees market turmoil as an opportunity and not a threat.

(May 10, 2010) — After slashing its holdings in Greece, Spain, and Portugal last year, Norway’s sovereign wealth fund said it may be able to gain from the turmoil in debt and stock markets.

Norway’s Government Pension Fund Global is the world’s second largest SWF after that of the United Arab Emirates.

“We see market turmoil as an opportunity and not as a threat,” said Norges Bank Investment Management chief Yngve Slyngstad, according to Bloomberg. He added that the fund might delay investing in real estate in anticipation of falling property prices.

“Stock markets in the United States and Asia performed better than in Europe, which was held back by concern over high government debt in several countries,” said Slyngstad. The fund is slightly underweight in stocks from Portugal, Greece, Italy and Spain and significantly underweight in bonds from these countries at the end of last year.

The fund, built from Norway’s oil and gas revenue, reported a 3.9% return in the first quarter, which beat a benchmark portfolio index by 0.4%. Its value rose to $468 billion at the end of March.

In 2009, the SWF recouped most of its losses in 2008, when a plunge in global stocks erased gains since it started investing in Norway’s oil and gas revenue in 1996, Bloomberg reported. Commonly known as the “oil fund”, the wealth fund gets its investment guidelines from the government, which recently gave approval to invest as much as 5% of its value in real estate.

In the first quarter, 62.6% of the fund was allocated to stocks with 37.4% in debt. Equity investments returned 4.9% in the first quarter, while fixed-income investments returned 2.1% measured in international currency.

In other news, the fund named Karsten Kallevig as head of real estate investments, effective September 1. Kallevig is a partner at Grove International Partners and head of its Tokyo office. Additionally, the fund announced the opening of an office in Singapore, its second in Asia. “Asia is of increasing importance to NBIM,” Yngve Slyngstad, NBIM CEO said in a news release. “The next step into Singapore will further strengthen our operations in this region.”

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href=''></a>; 646-308-2742