November 20, 2008 / 2:44 PM / 10 years ago

UPDATE 2-Norway oil fund says still hunting for stocks

* Oil fund will continue to buy equities despite markets

* Says owns 1.25 pct of European stocks, half that elsewhere

* Has $20 bln for real estate investment starting in 2009

* Says took part in 6 bank sector recapitalisation schemes

* Has no plans to start buying commodities in 2009

(Adds details, quotes, background)

By John Acher and Wojciech Moskwa

OSLO, Nov 20 (Reuters) - Norway’s $300 billion sovereign wealth fund will remain a big buyer of stocks after raising its holdings to 1.25 percent of European equities and about half that proportion in markets elsewhere, its chief said.

Commonly known as “the oil fund”, the Government Pension Fund — Global invests Norway’s oil and gas wealth in foreign stocks and bonds for when the “black gold” runs out. It held 0.77 percent of Europe’s stocks at the end of 2007.

Executive director Yngve Slyngstad said in a briefing for foreign journalists in Oslo that the current market weakness was an opportunity for the fund, which is boosting its equity allocation to 60 percent of total assets from 40 percent.

“We are slightly above 50 percent (in equities), so we will continue to be large buyers over the nearest months,” Slyngstad said on Thursday. “We have had a massive increase in our ownership stakes this year.”

“We now own one and a quarter percent of European equity markets. Outside Europe it is pretty much exactly half that.”

The fund, which has half of its equity portfolio in Europe, owned 0.48 percent of stock markets in North and South America and 0.63 percent of Asian equities at the end of the third quarter of 2008, according to hand-out material.

The world’s second biggest sovereign wealth fund after that of the United Arab Emirates, said it owns shares in about 7,000 companies. Slyngstad said that number would grow as the fund is boosting investment in more emerging markets and smaller-cap stocks.

“These market circumstances suit us very well, we are a large buyer in a market with more sellers than buyers,” he said.

INDEX INVESTOR

Slyngstad said the fund was basically an index investor, often buying shares in each of its 7,000 companies on a weekly basis. Then it took long or short position in selected stocks or sectors according to its market view.

Slyngstad said the fund was raising its equities allocation by investing much of its inflows — which have totalled roughly 400 billion crowns ($56.73 billion) over the past 12 months — in stocks rather than by selling out of bonds.

“We have had a stabilising effect (on the markets) to the extent that at least there’s one buyer out there,” he said.

Slyngstad declined to say how he expected the markets to perform going forward, but said: “Our strategic choices are based very long-term horizons, so we do not change the course based on current market circumstances.”

“We do not reduce our risk appetite even if the volatility in the market is going up,” he said.

Despite the huge inflows this year, generated by record high oil prices, the fund’s overall value has stayed nearly unchanged at around 2 trillion crowns due to weak global markets. A weaker crown has supported its value in local currency in past months.

$20 BILLION FOR REAL ESTATE

The fund has been given permission by the finance ministry to put up to 5 percent of its assets into real estate, and Slyngstad said it would begin investing in property next year.

“We basically have $20 billion sitting on the sidelines to invest in the international real estate market,” Slyngstad said, adding however that it was not certain if the fund would start investing in property in the first or second half of 2009.

The fund has taken part in six financial sector recapitalisation issues this year, four in the second quarter and two in the third quarter, for about $1 billion which he said was less than could be assumed based on the size of its stakes.

“We are still cautious about this market, we are long-term but also cautious investors,” he said when asked why the fund’s participation had been lower than its weight as an owner.

He declined to name the financial institutions whose recapitalisation issues the fund had supported and he said the fund remains slightly underweight in financial stocks.

He said the fund, which this year has also been granted leeway to take up to 10 percent stakes in single companies from an earlier of 5 percent, has built stakes of “slightly” more than 5 percent in some companies, but he did not name them.

The fund has also been given permission to invest in commodities. Slyngstad said the fund has not done that yet and has no plans to start doing so in 2009. (Editing by Toby Chopra)

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