NORWAY - The EUR80bn Statens Petroleumsfond has posted its first ever negative return, of -2.5% in 2001, a result it blames on weak equities markets in the third quarter.
During 2001, the Statens Petroleumsfond - which is run by the asset management side of Norges Bank - saw its equities portfolios post a -14.6% return, the second successive year of negative equities returns. Fixed income provided some relief, returning 5%.
Despite the negative returns, Norges Bank dismissed fears, stating that poor returns are a part of equity investing: “It is precisely the risk that equities may generate poor returns in periods that enables investors to achieve a higher return in the long term on equities than on investments that vary less in value.”
The fund did well during the bull market years of the late 1990s, seeing returns of 12.9% and 34.8% on its equities portfolio in 1998 and 1999. Despite the past two negative years, the cumulative return on equities since the fund first invested in equities in 1998 is 23%.
Currently, Norges Bank is looking to hire external fund managers for active specialist equities mandates. It is also looking to hire fixed income managers to run 14 mandates for the Statens Petroleumsfond. The size of the mandates awarded will vary between EUR115m and EUR1.15bn, and will cover a variety of regions and sectors. Norges Bank will appoint managers for the fixed income mandates throughout the year.
The Statens Petroleumsfond is a 'buffer' fund set up by the Norwegian government to cover government deficit including any future pensions liabilities.
By Geoffrey Ho
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