Asset AllocationMay 2, 2023

Equity Investments Fuel 5.9% Q1 Return for Norway’s Sovereign Wealth Fund

The pension giant also excluded two firms for ‘serious violations of individuals’ rights’ in Myanmar.

Reported by Michael Katz

A strong quarter for equities helped fuel a 5.9%, or 893 billion kroner ($83.8 billion) investment return for Norway’s sovereign wealth fund in the year’s first quarter. The performance raised the portfolio’s value to 14.29 trillion kroner, or $1.34 trillion, at the end of March from 12.43 trillion kroner to close 2022.

The Government Pension Fund Global’s asset allocation is 70.1% in equities, 27.3% in fixed income, 2.4% in unlisted real estate and 0.1% in unlisted renewable energy infrastructure. Despite the robust return for the quarter, the pension fund underperformed its benchmark by six basis points.

The fund’s equity investments returned 7.4% during Q1, and its investments in fixed income returned 2.7%. Meanwhile unlisted renewable energy infrastructure and unlisted real estate lost 3.8% and 1.0%, respectively.

“The equity investments had the most positive contribution to the return in the quarter,” Trond Grande, deputy CEO at Norges Bank Investment Management, which manages the pension fund, said in a release. “The rise of the equity market was to a great extent driven by the technology and consumer discretionary sector.”

The pension fund noted that the krone depreciated against several main currencies during the quarter and that the currency movements contributed to a “considerable increase” in the fund’s value to the tune of 755 billion kroner. The inflow into the fund totaled 217 billion kroner.

The executive board of the pension fund global also announced it has decided to exclude two companies from investment “due to unacceptable risk that the companies contribute to serious violations of individuals’ rights in situations of war or conflict.”

The pension fund’s Council on Ethics recommended that the fund exclude public gas companies Korea Gas Corp., of South Korea, and GAIL Ltd., of India, for allegedly partnering with Myanmar’s state-owned oil company, Myanma Oil and Gas Enterprise.

The council noted that in February 2021, the armed forces in Myanmar staged a coup d’état, “after which the military has intensified its extremely serious abuses of civilians.”

The council said the companies’ “business partnership with MOGE represents an unacceptable risk of contributing to extremely serious norm abuses in the future.”