The equities allocation of Norway’s sovereign wealth fund has strayed still further above the ceiling in its investment mandate, after the asset class returned 6.6% in the first quarter and bonds lost value, according to interim results published today.
Norges Bank Investment Management (NBIM) reported that the Government Pension Fund Global (GPFG) produced a return of 4.0% overall between January and March, equivalent to NOK382bn (€38bn), with total assets growing to NOK11.03trn by the last day of the quarter.
Trond Grande, deputy chief executive officer of the central bank investment arm, said: “The equity investments had the most positive contribution to the return in the quarter. The rise of the equity market was to a great extent driven by the finance and energy sector.”
The proportion of the fund invested in equities at the end of March was 73.1%, NBIM reported, which is higher than the weighting to equities at the end of December of 72.8%.
These figures compare to the equity allocation in the GPFG’s strategic benchmark index, which has been set at 70%.
According to the fund’s rebalancing rule, rebalancing action is triggered if the giant fund deviates by more than 2% from its strategic equities allocation.
NBIM has previously said that when this situation occurs, it means the fund will sell – or buy – shares in the long-term.
At the end of March, unlisted real estate made up 2.5% of the GPFG and fixed income investments constituted 24.5%, according to the announcement.
NBIM also said the Norwegian krone had appreciated against several of the main currencies during the quarter, and currency movements contributed to a NOK178bn fall in the fund’s value.
The government, meanwhile, withdrew NOK83bn from the fund in the period.
While equity investments returned 6.6% and unlisted real estate produced a 1.4% return in the three-month period, fixed income investments resulted in a 3.2% loss, NBIM reported, after a quarter which saw a rise in yields on 10-year government bonds from most major sovereign issuers, reversing the previous trend.
NBIM also announced that the fund’s return was 24 basis points higher than the return on the benchmark index in the first quarter.