NORWAY - The Norwegian Government Pension Fund - Global posted its "best ever" quarterly return of 13.5% between June and September, even though externally-managed assets lost ground, and raised the value of the fund to NOK2.55trn (€304bn).
Latest figures from Norges Bank Investment Management (NBIM) showed the third quarter return exceeded the overall benchmark by 1.5 percentage points, while over the nine months to September 2009 the return was 21.8% - a return of 3.4 percentage points above of its benchmark.
This is equivalent to returns of NOK325bn in the third quarter and NOK529bn over the year-to-date.
The positive investment returns were driven primarily by a 17.7% return on the fund's equity portfolio, which accounted for 62% of the fund at the end of the quarter, while fixed income investments produced a 7.2% return.
Yngve Slyngstad, chief executive of NBIM, said: "The liquidity in fixed income markets was abnormally low at the start of 2009, but has improved. This has led to an upturn in prices and more normal levels in the third quarter. We expect this development to be more limited going forward."
Figures showed management of the equity portfolio produced an excess return against the benchmark of 0.2 percentage points, following positive returns from the internally-managed portfolios. The external equity management was "marginally negative" over the third quarter, as the value of these equity assets fell by NOK25bn, according to the pension fund.
The fixed income portfolio produced the best excess return against its benchmark and delivered 3.3 percentage points, which NBIM attributed to "illiquid positions established before the financial turmoil began. Positions in securitised debt had a particularly positive impact, while corporate bonds also contributed positively".
External management now accounts for around 13% of the fund's assets, as the value of externally-managed fixed income assets also fell by NOK19bn. However, the report noted external fixed income management is now at its lowest level since 2003 following a decision in 2008 to "phase out mandates for investments in securitised debt, particularly in the US".
The government pension fund said its externally-managed assets in total lost NOK45bn in Q3, to NOK332bn.
Other figures from the quarterly report showed the value of the fund rose by NOK163bn in the three months to September, of which NOK49bn came from inflows of capital. This is slightly higher than the inflows in the first two quarters, although the total inflows for the nine months is NOK 133bn, which is significantly lower than the NOK 384bn recorded for the whole of 2008. The report meanwhile noted a strong krone also reduced the fund's value by NOK211bn between June and September.
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