OSLO, Sept 15 (Reuters) - Norway’s $375 billion sovereign wealth fund said on Monday that it had been prepared for the bankruptcy filing by U.S. bank Lehman Brothers LEH.N, in which it held more than $840 million worth of stocks and bonds at the end of 2007.
“This is a very serious situation which we are monitoring closely,” spokeswoman Siv Meisingseth at Norges Bank, which runs the fund for the government, told Reuters. “But it is also a situation we have been prepared for.”
Lehman said it filed for Chapter 11 bankruptcy protection and was attempting to sell assets in the face of the credit crisis, shaking financial markets worldwide on Monday.
The Government Pension Fund — Global, which invests Norway’s oil and gas revenues in foreign stocks and bonds, owned a 0.27 percent equity stake in Lehman Brothers at the end of 2007. At the time it was worth 515 million Norwegian crowns ($88.78 million).
It also held Lehman Brothers Holdings Inc fixed income securities worth 4.38 billion crowns. It also held some 1.55 billion crowns of debt from other Lehman vehicles.
It is not clear how the fund’s exposure to Lehman Brothers changed in 2008, but its managers have been seeking to increase the allocation of equity holdings to about 60 percent of the fund this year from the previous ceiling of 40 percent.
Norway’s oil fund, which is Europe’s biggest equity investor, has argued that greater exposure to stocks would boost its return over the long term and that equity valuations are less volatile than oil prices in any case.
The fund’s chief Yngve Slyngstad told Reuters in May that he was looking to do more private equity-type deals, including potential recapitalisation of banks.
But the equity-focused strategy has backfired amid turbulence this year. The fund recorded its worst-ever quarter in January-March when it shrank $15 billion despite new transfers of more than that due to high oil prices.
In the second quarter the fund grew, but still posted a negative return on investment.