Home > News > Risk > Despite a 1.5% Loss, Norway’s Sovereign Wealth Fund Still Beats Q1 Benchmark
Risk

Despite a 1.5% Loss, Norway’s Sovereign Wealth Fund Still Beats Q1 Benchmark

Negative returns triggered by increasing uncertainty as well as volatility in global equities markets.

By Chris Butera

The international stock selloff may have caused Norway’s trillion dollar Government Pension Fund Global to lose more than $20 billion in the first quarter, but the massive sovereign wealth fund still outperformed its benchmark.

According to the Q1 report from the fund’s manager, Norges Bank Investment Management, returns generating a 1.5% loss of value were brought on by “increased volatility in global stock markets,” the fund said. Inflation had also risen due to increased US wage growth as well as expectations of rapidly rising interest rates, which then brought on fears of increased protectionism.

“The most important expression of the risk in the fund is that the strategic equity share is set to 70%,” Yngve Slyngstad, CEO of Norges Bank, said in a statement. “This means that fluctuations in the fund’s value are predominantly determined by the development in global stock markets.”

The negative returns came from equities and fixed income investments at -2.2% and -0.4%, respectively. Unlisted real estate investments picked up the slack, raking in a positive 2.5% for the fund, which covers the retirement benefits of the entire country.

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Despite this hiccup, the fund’s lackluster returns were still 10 basis points higher than its benchmark, leaving the Norwegian pension fund’s value above $1 trillion.

As of March 31, 66.2% of the entities’ portfolio was invested in equities, 2.7% percent in unlisted real estate, and 31.2% in fixed income.

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Home > News > Regulation > North Carolina Retirement Systems’ Assumption Rate Reduced to 7%
Regulation

North Carolina Retirement Systems’ Assumption Rate Reduced to 7%

Fund now projected to meet return expectations over the next 30 years.

By Chris Butera

The North Carolina Retirement Systems is lowering its investment assumption rate from 7.20% to 7%, a move first proposed 20 years ago.

At the $98 billion fund’s Thursday board meeting, the Teachers’ and State Employees Retirement System and Local Government Employees’ Retirement System’s boards unanimously approved of the decision.

At 88% funded status, the pension system is one of the top five best-funded in the country and the ninth-largest public pension fund in the country. The fund provides retirement benefits for more than 950,000 state and local government workers.

Despite this funded status, the fund has not been able to meet its assumptions in 20 years. Last year, the fund lowered its rate from 7.25% to 7.2%.

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Treasurer Dale Folwell, the sole trustee of the fund, praised the board’s decision, saying that in order to meet future expectations, “realistic assumptions” are needed. “Lowering this assumption will provide the best opportunity to meet the state’s long-term obligations as well as maintain its AAA bond rating,” he said in a statement.

According to the 2016 Asset Allocation Study conducted by the Investment Management Division, the new assumption rate has a more than 50% chance of being achieved over the next 30 years.

The 7% reduction is effective immediately, with changes to employer contribution rates to occur over a three-year period. It is expected that some of these employer contribution rate increases have already transpired under stabilization policies the boards had already adopted in 2016.

Another result of the change is a 2-3% increase in pension plan obligations (both funding and financial reporting), which will also lower the funded status of the affected systems by the same amount.

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