NORWAY - The Government Petroleum Fund (Statens Petroleumsfond) has become the latest fund to benefit from the recent rebound in global equity markets, after posting its highest quarterly results since 1999.
The fund returned an overall 7.7% in Q2, beating its benchmark by 0.07%. The last time it reached an equivalent high was in Q4, 1999, when it registered 8.0%.
Its equity portfolio posted a 15.6% yield. The return on the fixed income portfolio was 2.8%.
The figures mean a total return of 5.9% for the first six months of the year, a 0.31% outperformance on the customised benchmark.
Measured in Norwegian krone, the return is 15.3% due to the krone’s depreciation against the currencies in the benchmark portfolio.
The increase in the capital value of the fund to NOK775.5bn at the end of Q2 was attributed to the allocation of new capital, the return in capital markets and to the depreciation of the krone.
Some NOK23.1bn was transferred to the international equity and fixed income portfolios during the quarter. This is an increase of NOK93bn in the course of the quarter and an increase of NOK166bn since year-end.
Since January 1998, the fund has grown from NOK113bn to its current NOK775bn. Some 23% of the fund is now managed externally, accounting for 45% of management costs.
External managers at the fund carry about 65% of risk in the total portfolio which is largely associated with active management. At the end of Q2, about 90% of the fixed income portfolio was managed internally, mainly through enhanced indexing. The rest was managed externally, mainly comprising passive US mortgaged-backed bonds and other active global strategies.
During Q2, the fund hired Citibank as global custodian for its fixed income instruments.
At the same time Credit Suisse Asset Management, Wellington Management and Alliance Capital were awarded three new equity mandates for global business sectors .
Around 57% of the equity portfolio is being managed internally in Norges Bank. Some 34% is managed by enhanced indexing and 16% is active management in selected sectors. Some portfolios are also being held internally prior to transfer to external active managers.
About 43% of the equity portfolio is managed externally. More than 70% of this is active management in regional mandates, while the remainder is active management in defined business sectors.
The Q2 return on the Environmental Fund - which is separate from the Petroleum Fund - was 15.3% measured in terms of the benchmark portfolio’s currency basket.
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