NORWAY - The market value of the Government Pension Fund-Global increased by NOK46bn (US$8.5bn) during the second quarter of 2008, stabilising at NOK1,992bn (US$367.3bn), despite negative returns.
Yngve Slyngstad, executive director of Norges Bank Investment Management (NBIM), commented: "The second quarter featured considerable volatility in both equity markets and parts of fixed income markets.
"The crisis in the financial system continued, with international financial institutions reporting heavy losses. Lower growth and accelerating inflation led to lower corporate earnings expectations."
Transfers of NOK91bn (US$16.8bn) were made to the fund during the quarter, while a negative return on investment reduced the value of the fund by NOK39bn (US$7.2bn).
Further, a stronger kroner in relation to the currencies in which the fund was invested reduced its value in NOK terms by NOK6bn (US$1.1bn).
The fund said returns were 0.24% higher than that on the benchmark portfolio defined by the Ministry of Finance, while the annualised excess returns over the past three years had been -0.02%.
The Ministry of Finance set a limit of 1.5% on the extent to which the composition of the fund portfolio may deviate from the benchmark portfolio.
The equity portfolio accounted for more than 50% of the fund at the end of the second quarter and, for the first time, was larger than its fixed income portfolio.
This expansion of the equity portfolio resulted from a decision in June 2007 of the Ministry of Finance to raise the fund's strategic allocation to equities from 40 to 60%.
The fund's average ownership interest in European companies now exceeds 1%.
The British Medical Association (BMA) has warned chancellor Philip Hammond to reform the NHS pension scheme rules or doctors will reduce their working hours.
The lifetime allowance should be scrapped and replaced with a lower annual allowance, last week's Pensions Buzz respondents said.
Action for Children Pension Fund has outsourced its pensions administration to Trafalgar House.