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Adjustments to the investment strategy

More investments in emerging markets, inclusion of real estate as a separate asset class, and larger ownership stakes in individual companies. These were among the most important adjustments made to the guidelines of the Government Pension Fund – Global on 4th April 2008. While broadening the Fund's investment strategy, the overall aim of maximizing long term return through ethically responsible investments nevertheless prevails.

23/04/2008 :: Despite the financial turmoil during the second half of the year, the Government Pension Fund – Global achieved a 4.3 % return in 2007. Aided by high petroleum revenues, this enabled the fund to grow to a total value of NOK 2 019 billion. In its annual report on the Government Pension Fund (Norway’s Sovereign Wealth Fund, which, together with the Pension Fund – Global, consists of the entirely separate NOK 117 billion worth Pension Fund – Norway), the Ministry of Finance made several recommendations. These were adopted by the Council of State 4th April 2008.

Among the most important changes approved in respect of the Government Pension Fund – Global, were the decision to include real estate as a separate asset class, the increased limit on the ownership stakes the Fund may hold in any single company, as well as the expansion of the benchmark portfolio for equities, to include all advanced and secondary emerging stock markets.

Concerning the inclusion of real estate, the new guidelines envisage that up to 5 % of the Fund’s capital may be invested in real estate. This increase will be compensated for by a reduced allocation of funds to fixed income investments.

- Investing a portion of the Fund in real estate is expected to improve risk diversification and enhance returns, Finance Minister Kristin Halvorsen comments on this move.

The new rules on ownership stakes increase the maximum stake the fund could hold in any individual company from 5 % to 10 %. The Ministry of Finance emphasizes that this in no way heralds an abandonment of the Fund’s role as a pure financial, rather than strategic, investor. On average, the Fund owns less than 1 % of each of the companies in its portfolio, a situation which is not expected to change under the new rules.

While the Fund already is involved in certain advanced emerging economies, such as Brazil, Mexico, South Africa, South Korea and Taiwan, the recommendations adopted by the Government means that the Fund’s benchmark portfolio for equities will be expanded to include all the advanced and secondary emerging stock markets, as defined by the FTSE. This implies that the current benchmark will be expanded to also include the stock markets in the following countries: Argentina, Chile, China, Colombia, the Czech Republic, Egypt, Hungary, India, Indonesia, Malaysia, Morocco, Pakistan, Peru, Poland, the Philippines, Russia, Thailand and Turkey.

 

Read the whole report here

A presentation of the Fund held 2nd April 2008 in Brussels, by Investment Director Thomas Ekeli

 

 

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Despite the financial turmoil, 2007 was a satisfactory year for the Government Pension Fund

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