World’s Largest Sovereign Wealth Fund Cutting Volatile Energy Stocks

Norway’s nearly $1 trillion sovereign wealth fund, the Government Pension Fund Global, will be letting go of a chunk of its energy holdings.

The fund, which recently posted $56.6 billion in losses due to 2018’s equity volatility, has wanted to ditch nearly all of its oil and gas assets since 2017. Since a majority of its net worth is in this area, the Finance Ministry decided that was too much. Instead, it plans on the divestment of 150 “upstream” oil and gas companies, worth about $7.5 billion. Those holdings account for 1.2% of all the fund’s equities, and less than 1% of the entire portfolio.

The upstream businesses focus on exploration and production. Cairn Energy, Anadarko Petroleum, and Chesapeake Energy are some of the companies that will be removed from the portfolio.

The goal is to reduce Norway’s susceptibility to ever-volatile oil’s price risk, according to the Ministry. Oil has a tendency to plunge in price, as happened in 2015 and 2016. Divestment, it believes, would open more ways to diversify the fund’s portfolio.

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“The objective is to reduce the vulnerability of our common wealth to a permanent oil price decline,” said Minister of Finance Siv Jensen. “Hence, it is more accurate to sell companies which explore and produce oil and gas, rather than selling a broadly diversified energy sector.”

It is now up to parliament to approve the decision. If approved, the upstream firms will be phased out “over a longer period,” said the fund.

“The Government follow the intentions in our advice from 2017,” said Deputy Gov. Egil Matsen. “By removing exploration and production companies, the goal is to make the government’s wealth less vulnerable to a permanent drop in oil prices.”

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Tags: ESG, Government Pension Fund Global, Norway, oil and gas, Sovereign Wealth Fund, Stocks

Retired educators in Texas’ $154 billion Teachers Retirement System may get a one-time pay bump during state’s next budget cycle.

Two Republican-sponsored bills would grant the retirees what amounts to an extra paycheck for one year. The teachers’ union wants a permanent increase. The first, backed by Houston Sen. Joan Huffman, would give them an extra payment equal to their current monthly retirement check or up to $500 in the 2020-21 budget cycle. The second, supported by Friendswood Rep. Greg Bonnen, is more generous and would appropriate up to an additional $2,400 to ex-teachers.

Huffman, a previous judge and prosecutor, has been a senator since 2008. Bonnen is a practicing neurosurgeon and co-founder of various medical facilities. He has been in office since 2013 and has supported reforms in the retirement system, such as 2017’s annuity payment and distribution bill, which passed.

Authors of the second bill want the money withdrawn from the state’s rainy day fund, according to the Statesman.

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In addition, both bills would allow the pension system to be fully funded within 31 years. To bolster the pension fund, the Huffman bill would increase contributions from the state, school districts, and active teachers to shore up the fund, while Bonnen’s would only raise state contributions.

Bonnen said making the fund “actuarially sound” treats teachers like the professionals they are.

The Teachers Retirement System is currently 76.9% funded and able to pay off all unfunded liabilities within 87 years.

Cost estimates regarding the bills have yet to be released.

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Tags: Joan Huffman Greg Bonnen, Pension, Texas, Texas Teacher Retirement System (TRS)