NORWAY – The 86.5 billion-euro Petroleum Fund has rebalanced its benchmark portfolio in a two-stage process that took place in February and March.
Norges Bank Investment Management, which manages the fund on behalf of the Norwegian government, said the move was made because the weights in the actual benchmark portfolio “deviated substantially” from the weights in the fund’s strategic benchmark portfolio.
At the end of February, the asset classes’ weights in the actual benchmark portfolio were brought back to 40% for equities and 60% for fixed income instruments, Norges Bank said. At the same time, the regional weights in the equity benchmark were adjusted to 50% for Europe and 50% or the rest of the world.
The end of March saw the completion of the rebalancing when the regional weightings in the fixed income benchmark were restored to the strategic weights.
“The rebalancing was carried out efficiently and with lower transaction volumes and costs than has been the case with previous full rebalancings,” the bank said. “This was largely attributable to the division into two stages.”
The fund returned -1.7% in the first quarter, taking its market value to 682.0 billion Norwegian crowns (86.5 billion euros) at the end of the first quarter. This represents an increase of 73.0 crowns since the end of 2002.
“The increase is due partly to the transfer of new capital and partly to the depreciation of the crown,” it said. A capital equivalent of 43.3 billion crowns was transferred to the fund in the quarter.
The equity portfolio rose to 264.4 billion crowns from 229.8 billion crowns - with around 59% managed internally. The fixed income portfolio rose to 416.4 billion crowns from 378.0 billion crowns – with 90% managed internally.
Management costs rose to 172.8 million crowns, or 11 basis points, from 128.7 million crowns, or eight basis points, in the first quarter of 2002. At the end of the first quarter, 22% of the fund was managed by external managers.
Norges Bank also said that it awarded four new mandates in the first quarter. It awarded a sector mandate and an active small-cap mandate to Schroder Investment Management. It also awarded an active regional mandate to Alpha Investment Management and a sector mandate to Alliance Capital management.