By Matt Ritchie
Norway’s Government Pension Fund Global returned 7.1 per cent, or NOK 234bn, in the first quarter of 2012, the fund has announced.
Strong stock market performance was credited with the return, which was the third largest since the fund’s inception. The market value of the fund rose NOK 185bn to NOK 3,496bn, helped by NOK 60bn in new capital from the government.
However, a strengthening of the krone against several major currencies reduced the market value by NOK 110bn.
Equity investments returned 11 per cent and fixed-income investments returned 1.6 per cent. The overall return was 0.3 percentage points higher than the return on the benchmark indices.
Norges Bank Investment Managers manages the fund, and chief executive Yngve Slyngstad said the return was driven by stock markets in the US, Europe and Asia moving in “lockstep”.
The fund sold its holdings of Portuguese and Irish government bonds in the quarter and reduced its investments in government debt from countries including Italy and Spain. It also bought government bonds issued in local currency in emerging markets such as Brazil, Mexico and India.
“Predictability is important for a long-term investor and the euro area faces considerable structural and monetary challenges,” Slyngstad said.
The fund’s investments in euro-denominated Greek government bonds were exchanged for new bonds issued by the Greek government and the European Financial Stability Facility (EFSF) in March.
At the end of the quarter, the fund held 60.7 per cent in equities, 39 per cent in fixed income and 0.3 per cent in real estate.