Norway’s E48bn state oil fund finds itself in a peculiar position following the terrorist attacks in the US. Although it is exposed to American equities and fixed income, with the bulk of its assets coming from the government’s surplus revenue, the fund will find its assets under management exaggerated by the rise in oil prices. “Higher oil prices means higher incomes being transferred every quarter into the petroleum fund,” says Knute Kjaer, head of management at Norges Bank and responsible for the oil fund. In fact projected revenues from the government may now exceed $20bn (e22bn) this year opposed to last year’s corresponding figure of $16bn.
Kjaer is keen to stress that the outlook of the fund is long term and the benchmark has remained unchanged for three and a half years. “It is assumed that the strategic benchmark is a long-term benchmark so in principle, short-term movements do not affect it,” he says. Norway’s finance ministry sets the long-term benchmark and it has not suggested that it will make any adjustments as a direct consequence of the attacks in the US.
At present the fund splits equities and fixed income 40:60. In both cases the geographical breakdown is 50% in Europe, 30% in North America and 20% in Asia. Most of the North American holdings are in the US itself so the fund’s overall exposure to the US is a shade under 30% of its total assets.
Although the fund publishes its positions every quarter, it decided not to disclose any activity within the portfolio or any positions it has taken. And although the managers are able to tinker with tactical asset allocation, in practice the fund has a low risk profile with regards TAA and the changes are typically modest. “Tactical asset allocation in the past has not been an important part of our active management,” he says. The fund is not giving out details of its activity at the moment but will do so in its next report.

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