NORWAY - The 28 external managers for the Norwegian Government Pension Fund equity portfolio lost NOK6.1bn (€757m) over 2006, missing their benchmarks for the first time since the fund's inception.
In its annual report, Norges Bank, whose investment management arm manages 78% of the pension fund, revealed the fund’s external equity managers performed very poorly last year.
The firms, including some of the most well known in the industry, returned an aggregate return of -0.05%.
The bank claimed: “This is the first year since the fund’s inception that the external delivered an aggregate return lower than the benchmark.”
According to the report, almost half of the negative excess return was attributable to the mandates in Japan. There was no distinction in performance between regional and sector mandates – they all underperformed.
Despite the poor returns, Norges Bank was quick to defend its managers. “It is normal to evaluate manager performance based on a long term assessment horizon and losses of this order have to be expected in occasional unfavourable years.”
The severe losses incurred by the external managers were almost offset by the excellent returns generated by the internal management strategies. These delivered an excess return of NOK5.6bn.
Over the course of 2006 the fund awarded new specialist mandates for countries like China and Canada and also allocated three global mandates. Further details on the mandates were not immediately available.
Overall, the value of the Government Pension Fund increased by NOK384.6bn, and posted a return of 7.9% - equal to NOK124.1bn.
Currency exposure led to a reduction of NOK27.8bn but this did not lead to a loss of the fund’s purchasing power.
The Marks and Spencer Pension Scheme has completed buy-in deals worth £1.4bn with two insurers, mirroring similar transactions last year.
There have now been a total of 47 buy-in and buyout deals of over £500m announced since 2007. The full list, provided courtesy of LCP, is as follows...
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