UPDATE 2-Norway's $710 billion wealth fund back on top form in 2012

Fri Mar 8, 2013 10:00am EST

* Fund grows by about $100 bln in a year

* Sells French, UK govt debt, buys Mexico, Japan

* European holdings 48 pct in 2012 vs 53 pct in 2011

* Equity holdings rise above 60 percent

By Joachim Dagenborg and Balazs Koranyi

OSLO, March 8 (Reuters) - Norway's sovereign wealth fund, one of the world's biggest investors, grew by around $100 billion in 2012, sealing one of its best years on record as it benefited from the striking upturn by stock markets.

Known as the 'oil fund', it invests revenue from Norway's lucrative oil industry for the country's future. It is now worth around $710 billion, 40 percent more than the value of the entire Norwegian economy.

The fund has been steadily reducing its assets in Europe as part of a long-term plan to move into both emerging and developed markets in Asia and the Americas - where it sees the strength of the world's economy in the years ahead.

At the end of last year it sharply cut its holdings of bonds issued by the government of Britain and France, two countries struggling to reduce debt levels while their economies stutter.

But big gains in stock markets last year after major central banks acted to underpin their economies helped the fund return 13.4 percent in 2012, the second best performance since it started operating in 1996.

The fund lost 2.6 percent overall in 2011.

"The fund's good performance is largely the factor of a good run on the stock markets," Yngve Slyngstad, its chief executive said.

Managed by Norway's central bank, the fund cut its exposure to Europe to 48 percent of its total portfolio last year from 53 percent. Instead, it put more into countries such as South Korea, Mexico, Australia and Japan, it said on Friday.

The fund reduced its holding of British government debt by 13 percent in the fourth quarter. French government debt holdings fell by a quarter.

It lifted its share of Italian government debt to 26.5 billion Norwegian crowns from 24.8 billion, although this reflects a period prior the uncertainty caused by recent inconclusive elections in that country.

The fund also more than quadrupled its holding of Australian government debt.

SOLD APPLE, BOUGHT HSBC

It earned close to 30 percent on investments in the financial sector, which also had the biggest weight in its portfolio with 23 percent. Consumer goods, the second biggest segment within its share portfolio, also returned a hefty 24.5 percent.

Meanwhile, in poorly performing sectors, such as utilities and telecommunications, it only had a minimal exposure.

With the good mix, the fund's stocks earned it 0.5 percent above its benchmark, its best performance in years.

Among its top investments, it reduced its holdings in Apple by a fifth, or around $911.60 million in three months and also sharply cut its stakes in Vodafone, BG Group and ExxonMobil.

However, it sharply boosted its exposure to firms such as HSBC and BlackRock.

Slyngstad declined to predict how the fund would invest in 2013 but said he could not rule out it would return to Europe's most troubled economies, like Greece, Portugal and Ireland, where its current exposure is now minimal.

A Reuters poll of leading investment houses in February indicated that a small majority investors believe the U.S. dollar will be the best-performing major currency this year.

The oil fund is expected to grow to $1.1 trillion by 2020 and record investments into Norway's petroleum sector indicate plenty more income to invest beyond the end of the decade.

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Comments (1)
Obatkanker wrote:
very impressive to see norway wealth

Mar 13, 2013 11:15pm EDT  --  Report as abuse
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