NORWAY - The Government Pension Fund awarded six new fixed income mandates to external managers and overhauled the organisation of its internal asset management for equity investments in 2005.
In addition, the fund - a rebrand moniker for the dual bodies of the Government Petroleum Fund and the National Insurance Scheme Fund - established a separate internal mandate for inflation-linked bonds.
Under the change to internal equity management, all managers are currently managing within a long-short portfolio framework.
“This means each manager borrows shares from the internal index portfolio or in the market,” said Norges Bank Investment Management (NBIM), which manages a considerable proportion of the government’s pension assets, in its 2005 annual report.
“Thus, there is further specialisation among active strategies and indexing and internal financing.”
Reporting an annual return of 11.1%, with assets growing to NOK1.4trn, NBIM said the return on the equity portfolio was 22.5%, while the fixed income portfolio returned 3.8%.
At year-end, 19 external fixed income managers with 27 mandates managed total assets of NOK78bn, wile 24 external equity managers with 43 mandates managed assets equivalent to NOK217bn.
Commenting on the management of the equity portfolio, NBIM said: “In 2005, the share of mandates that were terminated was higher than usual. This was due to the fact that a number of portfolio managers had terminated their employment with the company in question and that mandates were split up into smaller specialist mandates.”
Approximately 10% of mandates are terminated each year.
At the end of 2005, more than 60% of the equity portfolio was managed internally in Norges Bank in an enhanced index portfolio. During the year, the value of the portfolio increased from NOK416bn to NOK582bn, including NOK50bn in new capital.
Of the 43 externally managed equity briefs, 28 represent regional and specific country mandates and 15 represent specific industry sectors.
At year-end, about 91% of the fixed income portfolio was managed internally by Norges Bank. There were 35 specialist mandates within fixed income management, eight of which were internal.
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