NORWAY - Mercer Investment Consulting has recommended that the Norway's NOK682bn (e86.4bn) Government Petroleum Fund (Statens Petroleumsfond) review its tactical allocation and currency overlay strategies.
The mainly positive report was commissioned by the Norwegian Ministry of Finance to evaluate the operational management of the 13 year old fund by Norges Bank Investment Management.
In its report, Mercer said: “Under certain circumstances tactical asset allocation can add value and we suggest that NBIM might re-examine whether it could benefit the fund.”
It added: “We would also suggest that the opportunities for currency overlay be reviewed as this can add value and /or reduce risk in the overall fund; currently, currency overlay is done only in a minor way.”
On investment management, Mercer proposed more “proprietary investment processes as the Fund moves into a more mature phase”, away from sometimes “traditional and short-term” approaches.
The report also recommended a dedicated selection and monitoring team for NBIM’s 19 external managers.
Knut Kjaer, executive director at NBIM, said: “NBIM is very satisfied with the conclusions.
“We have, however, no plans at this moment to change any part of the external manager structure as a direct consequence of the report.”
The fund returned -1.7% in the first quarter, 2003. Equities slipped 7.8%. But the return on fixed-income securities was +2.2%. The portfolio was also rebalanced, scaling equities back to 40% and 60% for fixed-income. Regional weights in the the equity and fixed-income benchmarks were adjusted to 50% Europe and 50% for the Americas, Asia and Oceania.
The first quarter also saw the fund add three new managers to its roster. They were Schroder Investment Management, Alpha Investment Management and Alliance Capital Management.
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