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2015-04-30 18:35:00

NORWAY EARNS MORE

NORWAY EARNS MORE

Norway's $916bn oil fund on Wednesday trumpeted its best-ever quarterly return, boosted by monetary stimulus in Europe that put a rocket under the region's stock markets.

The Government Pension Fund Global, which invests Norway's oil wealth, made more money in the first three months of the year than the government spent in the same period — and then some.

The fund returned 5.3 per cent, or NKr401bn ($53bn), in the first quarter, which its manager Norges Bank Investment Management said was its best ever performance, although this was flattered by weakness in the kroner.

Previously the best quarter in the fund's history in kroner terms was back in 2009, when it made NKr325bn in the third quarter. The government in Oslo spends about NKr300bn each quarter.

"The fund has become very large and the Norwegian kroner return is the biggest ever, higher than public expenditure," said Yngve Slyngstad, chief executive of NBIM. That was "a telling sign of its size", he said — now twice the size of Norway's economy.

The government deposited just NKr5bn into the fund in the quarter, the lowest since 1999, according to Mr Slyngstad. The plunging oil price has slashed the revenue Norway collects from its offshore fields.

After a weak return on European stocks last year, the market had rallied in the first quarter, producing a return of 8.5 per cent on more than 40 per cent of the fund's equity investments.

"What has contributed to the good results is the return on the European equities portfolio, outperforming the broader market in local currency terms and also against a basket of currencies," Mr Slyngstad said.

The return on bond investments was more muted at 1.6 per cent, and the fund was pursuing a longer term strategy to reduce its exposure to the euro area, he added.

It is also looking to build a "third leg" to balance its investment strategy by increasing real estate investments from 2.3 per cent to more than 5 per cent in the next few years, he said, pumping an extra NKr190bn into global real estate annually.

Recently the fund has come under pressure to divest from fossil fuel stocks. In anticipation of restrictions on its investments it continues to sell out of coal mining companies, and is talking to conglomerates about hiving off their coal interests.

The boards of Shell and BP had responded positively to the fund's request for further information on risks associated with climate change, and would be changing their reporting routines, said Mr Slyngstad.

But the "most important" development in the first quarter was that more companies in the US were accepting the "3-3 rule", he said, which allows investors owning more than 3 per cent of a company for more than three years to cast votes by proxy, helping to keep boards accountable.

The fund is aiming this year to give notice of its voting intentions at the annual meetings of up to 10 companies in which it invests, with a "clear ambition" to expand the practice to more of the 9,000 companies in which it holds stakes.

"Voting is our most important formal right as a shareholder in terms of influencing decisions at companies in which we have holdings," NBIM said.

The fund had a market value of just over NKr7tn on March 31, of which 62.5 per cent was invested in equities and 35.3 per cent in fixed income assets.

The NBIM declines to make forward statements.

ft.com

Tags: NORWAY, OIL, PRICE