NORWAY - Former ABP Investments CEO Jean Frijns and former Hermes CEO Tony Watson have been chosen by Norges Bank Investment Management (NBIM) for its investment advisory council, the bank stated today in its annual report.
The news comes as the Government Pension Fund - Global reported a 7.9% investment return for 2006, taking its assets to €221bn. NBIM manages the fund on behalf of the Norwegian finance ministry.
The other two members of the board are Alan Hodson, former global head of equities at UBS Investment Bank and Kenneth G. Lay, vice president and treasurer of the World Bank.
The bank cited challenges in developing and monitoring investment management as reasons for seeking external advice. In their two or three joint sessions per year the advisers and the executive board will also assess possible future real estate investments.
From the annual report it also emerged that Merrill Lynch lost out last year when new fixed income mandates were awarded to Ellington Management, Barclays Global Investors and Smith Breeden Credit Partners.
The 7.9% return for the Government Pension Fund - Global is lower than the 11.1% returned in 2005 but was still 0.15 percentage points higher than the benchmark set by the Norwegian finance ministry for 2006.
Annual average returns for the fund since it was set up ten years ago is now close to 4.6%. Last year was the ninth consecutive year of benchmark-outperformance for the fund.
The pension fund's assets grew to NOK1.78trn (€221bn), an increase of NOK384.6bn. Transfers from the finance ministry amounted to NOK288.3bn in 2006 and market return contributed NOK124.1bn to that increase. NOK27.8bn were lost through foreign currencies weakening against the Norwegian krona.
Local newspapers noted that judging from the sheer size of the fund every Norwegian now had NOK380,000 in the bank, the equivalent of an annual salary for the average worker.
NBIM, responsible for the investment of the government fund, noted that "internal equity and fixed income management contributed appreciably more to the excess return than external management". The return on the equity portfolio was 0.05 percentage points lower than the benchmark.
In total, external equity managers lost NOK6.1bn compared with the benchmark. However, NBIM stated that "losses of this order have to be expected in occasional unfavourable years" and that manager performance will be evaluated longer term. Last year, 78% of the fund was managed internally by NBIM, down from 91% the year before.