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Norway misses pensions benchmark with 4.3% return

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  • Norway misses pensions benchmark with 4.3% return

NORWAY -The Norwegian Government Pension Fund - Global returned 4.3% in 2007, which is the first time the fund has achieved lower returns than its benchmark portfolio since 1998.

The 2007 annual report from Norges Bank Investment Management (NBIM) revealed the annual return was 0.22 percentage points below the benchmark portfolio defined by the Ministry of Finance.

NBIM said although the overall figures show a positive return on all its portfolios, it admitted the recent turmoil in credit markets impacted the 2007 results, particularly in the second half of the year.

Figures showed the value of the fund increased by NOK235bn to NOK 2.019trn (€257bn) during 2007, but NBIM revealed positive contributions from equity managers was "outweighed by negative contributions from both internal and external fixed income management".

That said, the total returns on the equity portfolio was 6.82%, while fixed income investments generated a return of 2.96%, which means since 1998 there has been a positive average annual excess of 0.40 percentage points, or the equivalent of NOK23.5bn.

The annual report also showed the return on Norges Bank's foreign exchange reserves, which are invested in both equities and bonds, was 3.4%, while the return on the Government Petroleum Insurance Fund, which is invested exclusively in fixed income securities, was 5.2%.

As a result, total assets of the portfolios managed by NBIM reached NOK 2.261trn at the end of 2007, of which NOK214bn belonged to the long-term foreign exchange reserves, and NOK15bn to the Petroleum Insurance Fund.

In addition, the NBIM has also clarified the sovereign wealth fund's position on one of its strategic areas of corporate governance - the safeguarding of children's rights, including combating child labour - in an attempt to set a specific standard global companies will have to meet.

"NBIM Investor Expectations on Children's Rights" is divided into four main categories based on existing conventions from the International Labour Organisation (ILO) and the UN Convention on the Rights of the Child:

Prevention of the worst forms of child labour  Sustaining the minimum age standard  Promotion of children's welfare Governance structures

Examples of governance structures that NBIM requires companies to have in place - if they are to be considered as a positive investment - include a child labour policy; continuous risk analysis; preventive and corrective action plans and programmes, and monitoring systems.

However, NBIM said the "primary function of the Expectations is not to blacklist or rank companies, but to serve as a point of departure for constructive dialogue between investors and companies, and to set a clear standard that companies globally must be expected to live up to".

The full NBIM annual report will be available on March 11 2008, while the NBIM Investor Expectations on Children's Rights is accessible on the NBIM website.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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