Concerns over high sovereign debt coupled with the dramatic fall in BP’s share price have taken their toll on Norway’s Government Pension Fund Global, which returned -5.4% in the second quarter of 2010, pulled down by the decline in global equity markets. The result was in line with the return on the fund’s benchmark portfolio.

“The biggest stock market drop was in Europe, where the fund has about half its equity investments,” commented Yngve Slyngstad, chief executive officer of Norges Bank Investment Management (NBIM), the decline was largely having been driven by concern over high sovereign debt in some European countries, funding challenges for banks and fears of a new economic slowdown.

The fund’s investments consisted of 59.6% equities and 40.4% fixed income securities at the end of the quarter. The fund’s equity investments returned -9.2%, lagging the return on the benchmark portfolio by 0.03 percentage point. Fixed-income investments returned 1%, exceeding the benchmark by 0.06 percentage point.

The single worst-performing investment was in oil producer BP.
“The spill put the spotlight on safety standards in the oil industry,” added Slyngstad. “NBIM supports the board of BP’s commitment to ensure that safe and reliable operations top the company’s set of priorities. We also seek a wider industry effort that should be led by the largest companies to improve safety and environmental standards.”

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