March 16, 2012 / 10:01 AM / 5 years ago

UPDATE 2-Norway SWF voted against Greek bond plan

5 Min Read

* CEO says fund voted against Greek bond restructuring plan

* CEO says not positive on debt markets, continues to favour stocks

* Fund market value fell 2.5 pct, or $14.85 bln, in 2011

* SWF value now $607 bln, up from $572 bln at end 2011 (Adds CEO quotes, details)

By Victoria Klesty and Joachim Dagenborg

OSLO, March 16 (Reuters) - Norway's $607-billion sovereign wealth fund voted against Greece's bond restructuring plan as it opposed special treatment given to the European Central Bank, arguing bondholders should have been treated equally, the fund's chief said on Friday.

Yngve Slyngstad, the head of Norges Bank Investment Management, also told Reuters that the fund, one of the world's largest sovereign wealth funds, still prefers stocks over debt after spending more than 150 billion crowns ($25.9 billion) on European shares in the second half of 2011.

The fund's holding of Greek government debt fell to 1.5 billion Norwegian crowns ($261.6 million) by the end of 2011 from 4.9 billion crowns at the end of 2010, the fund said.

Slyngstad said the fund, known as the 'oil fund' as it invests Norway's tax revenues from oil and gas, had voted against Greece's restructuring plan, completed this month, on a "principles basis".

In the largest debt restructuring in history, private creditors of Greek debt, but not public sector creditors such as the ECB and the EU's investment arm the European Investment Bank, took losses on their Greek bondholdings to enable Athens to cut its debt, a condition of its second EU/IMF bailout.

"The ECB and EIB and maybe more for all I know got preferential treatment. We think that in principle that should be avoided," Slyngstad told Reuters in an interview.

"Given that it is a difficult and sensitive situation I will just say ... as a long-term and financial investor, our basis is that we have to do all our ownership decisions on the bond side on a principles basis," he said.

Looking to Asia

Norges Bank Investment Management, the central bank body that manages the wealth fund, said in its annual report released on Friday that the fund lost 2.5 percent last year but made a 4.4 percent return in the fourth quarter.

It still favours stocks over debt given low returns in debt markets.

"The general view is that interest rates are low, and real rates are zero or even negative, so we are not that positive on the bond market," Slyngstad said.

"We continue to invest in the equity market, I can say that much ... If the European equity market outperforms Asia, we are more likely to buy Asia than Europe," he said.

The fund bought more than $25.9 billion in European equities from the summer through the end of last year, and says more than half of the fund is invested in Europe.

"My view is that in a very long-term perspective, the changes that are happening now as a consequence of a difficult situation in the long run will be good for European companies, and equity investments," Slyngstad said.

"Therefore we are comfortable in a market like this to go and buy more equity." ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ TABLE-Norway's SWF largest holdings at end-2011 [ ID:nL5E8EF47K] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

The fund, which includes big property holdings in London and Paris, has got off to a positive start this year. It is now valued at $607 billion, according to its website on Friday, up from $572 billion at the end of last year, and $527.5 billion at the end of September.

Its 2.5 percent loss last year amounted to $14.85 billion and was 0.1 percent below the fund's benchmark portfolio, according to the annual report. In the third quarter the fund lost 8.8 percent on its investments.

"The result reflects substantial declines in share prices in 2011 and increased uncertainty about government debt in the euro area," Slyngstad said of the full-year loss.

Some 58.7 percent of the fund was allocated in stocks on Dec. 31, versus 55.6 percent at the end of the third quarter, the fund said. Most of the rest of the fund's assets are bonds.

Despite the fund's European focus, which mirrors the direction of Norway's trade flows, its long-term ambition is to direct new inflows toward fast-growing markets in Asia. ($1 = 5.7915 Norwegian crowns) (Editing by Patrick Graham and Susan Fenton)

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