Oslo Pensjonsforsikring is Norway’s largest local authority pension scheme. Named after the city it represents and with assets of €4.4bn, it manages and provides pensions income and benefits for some 30,000 active members, 23,000 deferred members and almost 56,000 pensioners who work or have worked in the Norwegian capital’s public sector.

Oslo Pensjonsforsikring is fully-owned by the City of Oslo, whose strong and stable economy has ensured that the scheme has more or less enjoyed a fully funded level since it was established in 1902.

Workers in Oslo’s public services have been able to sleep at night knowing their scheme can cover its liabilities with relative ease. Reflecting this strong level of sponsorship by its owner, Oslo Pensjonsforsikring  has not had to play the equity markets as much as its peers. In general, if research both past and present is to be believed, it is fair to say that equities remain the backbone of most pension schemes’ investments, since they offer the best return potential.

In recent times, there has been a flurry of activity to diversify some assets out of equities to protect against the volatility of stock prices, but for most, the long-term ‘truth’ that equities tend to correct themselves over time is enough to keep a large chunk of their assets in equities. But Oslo Pensjonsforsikring is something of a different beast.

You could argue that Oslo Pensjonsforsikring has enjoyed an easy ride for such a long time with the majority of its assets in fixed income vehicles, which are a safer option to equities but do not offer the same level of return. But nothing lasts forever and, since 2001, when it  was converted  into a limited liability life insurer by the city, and despite remaining Norway’s best-performing pension scheme, Oslo Pensjonsforsikring has been reviewing its investment strategy with the aim of increasing its equity weightings - at a time when others are looking to reduce theirs.

The goal to diversify and expand its equity portfolios has seen the equity weightings of Oslo Pensjonsforsikring’s overall portfolio go from some 20% in 2003 to its current level of almost 27%. The increase is the result on an ongoing project that underwent further change this year to include more private equity and create internally managed equity portfolios, and rebalance its domestic versus overseas holdings.

Part of the unique challenge face by Oslo Pensjonsforsikring is restructuring its ‘HTM equity’ allocations. These are equities classified as long-term holdings that are valued at cost rather than market price in the portfolios. “We previously invested heavily in Norwegian and Swedish HTM equities. But when we reviewed our equity portfolios and the value they add, we realised that if these were priced according to their market value and not cost price, the unrealised gain this would generate would see the scheme’s asset base increase by as much as 4.4%,” the scheme explains.

“We currently have 6.7% of our portfolio in ordinary domestic equity and 8.6% in domestic HTM equities. Then 3.5% is allocated to Swedish HTM equities and 8% is in foreign equities,” Oslo Pensjonsforsikring says. “We intend to increase the weighting in international mandates and reduce ordinary Norwegian equity exposure,” it adds.

Setting up an internal management structure relies on having the right person for the right job and Oslo Pensjonsforsikring says that once it had decided how it wanted the new portfolio to be structured, it undertook an asset manager selection process to find the right manager to help its equity allocations grow in line with the scheme’s objectives.


With its new internal equity portfolio up and running, Oslo Pensjonsforsikring has turned its focus to other forms of equity holding that would help achieve an appropriate level of diversification and reduce risk. In addition to reviewing and reorganising its overseas investments, it has also now begun delving into private equity funds and unlisted companies.

Oslo Pensjonsforsikring has always maintained holdings in non-domestic equity funds run externally. But it feels that these did not go far enough to benefit from the many opportunities international stock markets can offer. It has thus reorganised the way it runs its overseas equities portfolios to capture more of the market and reduce management costs. “The new set-up will hopefully extract the best of the different talents in the market and improve risk management,” says Oslo Pensjonsforsikring.

“We wanted to rebalance the bias that has kept us a bit top-heavy in domestic Scandinavian HTM equities,” Oslo Pensjonsforsikring continues. “Previously, our overseas equity investments consisted of a variety of mandates spread geographically in both passive and actively managed mandates. We have now focused on this portfolio to include pure beta mandates diversified across the US, Europe, Pacific, and other regions, notably Asia. In addition, we try to add alpha through a global mandate with a high tracking error.”

Having been shielded for a long time by a local authority that was affluent enough not to have to take lots of risk with its pension scheme, the City of Oslo’s public service fund, now a life insurance company with limited liability called Oslo Pensjonsforsikring, has had to take the plunge and increase its equity holdings.

To do this, it has carefully planned an efficient and streamlined means of reducing its domestic holdings that are held at cost rather than market price while increasing the level of diversification held in its overseas portfolios to ensure they reap the full benefits that these markets offer without adding too much risk or cost.

With an internal asset management structure established to help it achieve this, it is now confidently also looking at private equity and unlisted companies as prime investment potential.