Norway’s $640 billion (Dh2.35 trillion) sovereign wealth fund is seeking bigger stakes in selected companies as it takes a more active approach in managing its bulging portfolio after struggling to meet return targets.
“Compared to the rest of the fund, which is a more diversified portfolio, this group will focus on a concentrated number of holdings,” Petter Johnsen, chief investment officer for equities at Norges Bank Investment Management, said in a September 13 interview in Stavanger, Norway. “It’s clearly something we’re building up.”
Norway’s Government Pension Fund Global, managed by NBIM, lost 77 billion kroner ($13.5 billion) last quarter as stocks sank amid a deepening euro-area debt crisis. The fund is redesigning its strategy to capture more global growth, in part by cutting its share of investments in Europe, to fulfill its mandate of safeguarding wealth for future Norwegian generations.
While the Oslo-based fund mostly buys securities by following global indexes, it has leeway to stray from those benchmarks. The strategy was criticised after management of its bond portfolio contributed to record losses in 2008, prompting the Finance Ministry to tighten its guidelines.
As part of the fund’s capital strategies, it will seek stakes in share sales, in listings and during changes in capital structures to exploit its long-term outlook and size, according to a report outlining the investor’s goals through 2013.
“We are a long-term investor,” Johnsen said. “We are large and, all else equal, we should utilise those characteristics, active management.”
The fund has a real return of 2.57 per cent on average since 1998, and annual loss on that basis of 0.63 per cent over the past five years. It has a target to generate a real return of about 4 per cent on an annual basis.