Highlights: Reuters interview with Norway's oil fund chief

OSLO (Reuters) - Below are highlights of comments by Yngve Slyngstad, the head of Norway's $400 billion oil fund, in an interview with Reuters.

EQUITIES SHIFT

"What makes it very interesting for people in the market is that we are going from 40 percent to 60 percent in equities. So not only have we got this huge cash flow that we would have to invest anyway, but we are also buying equities and selling bonds to make the transition."

"So in this period we are a huge buyer of equities."

"We are just weeks away from crossing 1 percent ownership on average in Europe (in equities), and our ownership in the rest of the world is months, not weeks, away from crossing half a percent.

"Our starting point is 'Buy the whole market'. We are extraordinarily large in some senses ... in the amount of money that we are putting in every day. At last year's oil price we would be buying at $1 billion a week, and we may considerably exceed this."

"We can do commodities and oil futures if we want to, though we haven't."

RETURNS, LIQUIDITY AND TURMOIL

"Our portfolio has had a relative return below our benchmark for the past three quarters, but still we have come through this with very little pain compared to quite a few others. We have subprime exposure that is ... less than 0.4 percent of the fund."

"If you look at this amazing turbulence on fixed income markets, some of the things contributing to this are not event risks -- such as 9/11 or the bird flu or some external factors -- but rather internally generated systemic risks."

"Most risk systems were probably not set up for this type of risk. Another thing is whether liquidity risk was underestimated by market participants and all the risk models they were using."

"You can see that quite a few of these effects have not disappeared and the reduced liquidity is to a large degree still there in the markets."

"It (the liquidity crunch) hasn't really impacted us a lot with the exception that some portions of the bond portfolio have not been liquid so we have not been able to trade it -- we probably wouldn't have anyway. So we have been sitting with our bond portfolio in that segment, really the U.S. securitized segment. Liquidity has been low for everyone."

DEALS, STRATEGIC DIVISIONS

"A fund of our size is quite likely to have been shown quite a few deals ... I wouldn't say that we have not participated, but I won't confirm that we have either."

"The Capital Strategies division will be doing things that would represent a new departure for the fund -- concentrated large ownership, quite likely to be for a longer period -- using our size and our longer investment horizon."

"If for some reason we would participate in a recapitalization of a large bank with a large stake, basically this group would be doing it."

"On the equities side we essentially have an enhanced portfolio and a long-short strategy. The enhanced portfolio we call asset strategies and the long-short portfolio is based on global sector strategies."

"Portfolio managers will have the global sector universe, for example two people working on insurance, global insurance, and that's all they do. We don't have anyone running a regional portfolio."

"The Capital Strategy group is to take advantage of our size and longer horizon. We are willing to take larger positions."

"While the Capital Strategy group operates on single names only, the (new) Risk Strategy division operates more on a macro level. They will be going after segments of the market where they think the risk premium for the moment is attractive."

"Real estate investment (proposed by the finance ministry at up to 5 percent of the fund's value) will not be the dominant part of that investment group."

(Reporting by John Acher and Wojciech Moskwa; editing by Stephen Nisbet)