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Norway’s Nordic sovereign fund swelled by oil prices in first half

Norway’s domestically focused sovereign wealth fund posted a 4.3% investment return in the first six months of this year, boosted by rising oil prices.

The Government Pension Fund Norway (GPFN) – the sister fund to the country’s giant Government Pension Fund Global (GPFG) – added NOK10.4bn (€1.1bn) in the first half, meaning the fund’s total capital increased to NOK250.5bn at the end of June.

Folketrygdfondet, which manages the GPFN, reported that the fund returned 5.5% in the second quarter, beating its benchmark by 0.6 percentage points.

The 4.3% return for the whole of the January-to-June period was 0.8 percentage points above the benchmark, the Oslo-based manager said.

Acting CEO Lars Tronsgaard said: “First and foremost, it is the positive development on the equity market, driven by a high oil price, which contributed to the good result.”

Equities produced an 8.7% return in the second quarter for the GPFN, leading to a 7.2% return for the first half, while the bond portfolio generated 0.6% in the second quarter leaving it with a flat result for fixed income for the first half overall.

The first half returns for equities and bonds were 1% and 0.5% above their respective benchmark returns, Folketrygdfondet said.

The Oslo Stock Exchange’s All-Share index rose by 10.6% in the first six months of the year in local currency terms, with most of that gain coming in the second quarter. The Brent crude oil price rose by more than 19% in dollar terms in the same period.

As one of the world’s highest per-capita oil producing countries, Norway has a high proportion of oil and oil-related equities and bonds listed on its stockmarket.

In the other three countries where the fund can invest, however, Folketrygdfondet said equities rose just 0.9% in the three-month period in Norwegian krone terms.

The GPFN has a mandate to invest 85% of its portfolio in Norwegian assets and 15% in Denmark, Sweden and Finland. Asset allocation is split into 60% in equities and 40% in bonds.

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