NORWAY – The Norwegian Pension Fund Global (NPFG) has for the first time chosen to join a company’s election committee and will seek to establish closer contact with company boards in which it holds large stakes, the head of Norges Bank Investment Management (NBIM) has said.

Speaking as the NOK4.1trn (€558bn) fund announced that its equity portfolio boosted returns for the three months of 2013 to 5.4%, Yngve Slyngstad emphasised that the new active approach would allow NBIM to safeguard the fund’s value.

“Participation is in line with our long-term intention of establishing closer contact with company boards with a view to safeguarding the fund’s values,” he said.

As a result, Slyngstad will now sit on the election committee for Sweden’s Volvo.

At the end of December, the fund held NOK7.2bn worth of shares in the company, equivalent to a 4.5% stake.

It has a policy of not allowing its equity holding to exceed 10% of market value, but has sizable holdings in companies such as Smurfit Cappa (9.48%), Greencore (8.86%) and asset manager BlackRock (8.81%), as well as the China Water Affairs Group (7.63%) and Germany’s Kabel Deutschland (5.99%).
Several of the largest stakeholdings are in the financial sector, which reflects the fact the sector comprised nearly 23% of its equity holdings at the end of March, returning a below-average 8.3%.

The fund’s equity holdings overall returned 8.3% last quarter, led by 16.1% return from healthcare holdings and a 12.1% return from its consumer services exposure.

Only one sector saw negative returns, with its holdings in basic materials losing 3%.

It was also confirmed that NPFG would continue to diversify its equity holdings, proposing to buy Kuwaiti and Omani shares for the first time this year.

Its fixed income portfolio fared less well, only returning 1.1% overall.

The fund suffered losses of around 4% from its holdings in UK and Japanese sovereign debt, causing its return from government debt to fall to 0.6%.

Corporate bonds saw an above-average return of 1.5%, whereas securitised loans – such as mortgage-backed debt – returned 2%.

The fund once again saw negative returns from its real estate holdings, expanded to include investments in North America at the beginning of the year due to exchange-rate changes.

It said rental income returned 1%, with a further 0.5% return from an increase in property and associated debt value.

However, changes in the exchange rates led to losses of 1.6%, resulting in an overall loss of 0.3%.

The fund’s exposure to real estate nonetheless grew to an all-time high, accounting for 0.9% of assets.

At the end of March, NPFG had a 62.4% exposure to equities and 36.7% of assets invested in fixed income, a nearly 2-percentage-point reduction over December.