The Norwegian Government Pension Fund Global returned 3.9 percent (103 billion kroner) in the first quarter of 2010, helped by gains in global equity and fixed-income markets. The result was 0.4 percentage point higher than the return on the fund’s benchmark portfolio.
“The fund’s equity investments tracked global stock markets higher in February and March after a weak start to the year. Stock markets in the US and Asia performed better than in Europe, which was held back by concern over high government debt in several countries,” says Yngve Slyngstad, chief executive officer of Norges Bank Investment Management (NBIM).
The fund’s investments consisted of 62.6 percent equities and 37.4 percent fixed-income securities at the end of the quarter. The equity investments returned 4.9 percent, while fixed-income investments returned 2.1 percent measured in international currency.
The fund’s return is measured against the return on a benchmark portfolio set up by the Ministry of Finance. The equity and fixed-income investments outperformed the benchmark by 0.1 percentage point and 0.8 percentage point, respectively, in the first quarter.
“About half of the fixed-income portfolio’s excess return came from investments made before 2007 that became illiquid during the financial crisis. These benefited from an improvement in liquidity and prices of bonds, a development that started in the second half of 2009 and continued in the first quarter,” says Slyngstad.
The fund’s market value rose 123 billion kroner to 2,763 billion kroner in the first quarter. The market value is affected by capital inflows, returns and exchange rates. Inflows of government petroleum revenue to the fund totalled 19 billion kroner in the first quarter, the lowest since the fourth quarter of 2003. The fund returned 103 billion kroner. Fluctuations in the krone exchange rate had little impact on market value in the quarter.
NBIM on 1 March got a mandate to invest in real estate. Following this decision, the fund shall consist of 60 percent equities, 35–40 percent fixed-income securities and as much as 5 percent real estate. Karsten Kallevig will join NBIM on 1 September to head the real estate team. Kallevig has extensive experience in international real estate investment. He has headed Grove International Partners’ Japanese office since 2006 and worked for the company’s London office before that. Kallevig has a bachelor degree from Massachusetts Institute of Technology (MIT).
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