World's Largest Equities Investor Goes Back to Market

Norway's sovereign wealth fund--already the world's largest investor in equities--has to buy stocks when markets are falling as part of a strategy it calls rebalancing.

(October 29, 2012) — Norway’s $650 billion Government Pension Fund Global, the world’s largest sovereign fund, is now buying stocks amid a falling market.

“We can stomach buying more equities in falling markets,” Paal Haugerud, head of the Finance Ministry’s asset management unit, said in an October 18 interview in Oslo to Bloomberg. “Short-term volatility is of lesser importance for a truly long-term investor.”

The decision comes in an effort to rebalance by buying stocks when markets are falling. According to Bloomberg, the process will be triggered when the fund’s stock weighting deviates more than 4 percentage points from its 60% mandated level at the end of a month.

A result of the rebalancing will be greater opportunities among active managers, led by Chief Executive Officer Yngve Slyngstad, to make more active choices in investing Norway’s oil wealth as the investor struggles to meet its 4% return target. As part of that rebalancing decision, the fund is also moving asset allocation away from Europe as emerging markets in Asia and South America gain clout.

Talking to aiCIO in 2010, Slyngstad said the usual queries and conundrums over managing assets did not apply to Norway, due to the enormity of the fund’s portfolio. When asked for his views on the debate that was raging about how best to manage equities, he said: “We’re not for or against active or passive management for smaller firms or investors. What we are saying is that, for an investor of our size, we need to be a leader and take an active role. We don’t really think that there is an alternative to active management for our fund. In one sense, we are quite simply too large to contemplate indexing.”

The fund is the largest single holder of listed equities on earth, as explained in aiCIO’s Power 100 profile of Slyngstad. At last count, it held 8,200 companies, which made up 60% of the entire investment portfolio.

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