NORWAY - The Government Petroleum Fund (Statens Petroleumsfond) returned 12.6% for 2003, its highest returns ever.
The fund said that the upturn in the international equities market in 2003 resulted in the equities portfolio returning 22.8% for 2003, compared to -24.4% in 2002. The fixed income portfolio returned 5.3% for 2003.
The fund said that it had outperformed the benchmark by 0.59 percentage points in 2003 for the sixth consecutive year. Total excess returns were just over NOK9bn (e1bn).
The market value of the fund has increased by NOK236bn (e27bn) during the year to NOK845bn (e98bn) as at December 31, 2003. The fund said that it was now the second largest fund in Europe after the e150bn Dutch pension fund giant ABP. The fund received NOK103.9bn during the year as transfers from the government.
“Owing to the weaker krone exchange rate, the value of the Petroleum Fund increased by NOK41bn, measured in NOK, from 2002 to 2003. However, changes in the krone exchange rate have no effect on the future international purchasing power of the Petroleum Fund,” the fund said.
The return on the Environmental Fund in 2003 was 22.9% measured in international currency.
Knut Kjaer, executive director, Norges bank Investment Management said: “We have had excellent returns in 2003. The fund has some 40% in equities and the portfolio returned 23%. The last time we had such a high return was in 1999 where the fund returned 12.4%.”
He added that the fund was likely to invest in emerging market debt and could hire managers for this brief.
Over the year, the fund retained all its fixed income managers, but also hired TCW Asset management to run a US mortgage backed bond mandate.
In its regional equities mandates, the fund fired Deutsche Asset Management and Handelsbanken Asset Management and hired Alpha Investment Management. In the sectoral mandates, the fund dropped Arrowstreet Capital, Citigroup Asset Management, Dresdner RCM Global Investors and Merrill Lynch Investment Managers and has hired Alliance Capital Management, Schroder Investment Management and WH Reaves.
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