Government Pension Fund Global declines
The Government Pension Fund Global returned -2.5%, or -86 billion kroner, in 2011 as global stock markets slumped. Equity investments returned -8.8% in 2011 as stocks fell in Europe, where the fund had half its shareholdings at the end of the year. Fixed-income investments returned 7%, boosted by rising prices on government bonds from countries such as the US, the UK and Germany. The overall return was 0.1% point lower than the return on the fund’s benchmark indices, Norway’s Central Bank Norges Bank reported.
The fund in 2011 reduced its holdings of Italian and Spanish government bonds and increased its investments in US and UK government debt. It also sold most of its holdings of bonds issued by US mortgage agencies Fannie Mae and Freddie Mac. The fund bought stocks for 185 billion kroner from June through November, following a strategy of investing capital inflows in the worst-performing asset class.
The fund’s worst-performing stock investment was French bank Société Générale, followed by German carmaker Daimler and UK bank HSBC Holdings. The best performers were Apple, maker of the iPad and the iPhone, followed by UK drugmaker GlaxoSmithKline and US oil company Exxon Mobil.
Yngve Slyngstad, chief executive officer of Norges Bank Investment Management (NBIM), which manages the fund, said: “We are prepared for significant fluctuations in the fund’s value from year to year.”
The market value of the fund rose 234 billion kroner to 3,312 billion kroner in 2011. A weakening of the krone against several major currencies increased the value by 49 billion kroner. The fund also received capital inflows of 271 billion kroner from the government, the most since 2008.
Assets under external management were reduced during the year to 145 billion kroner, or 4.4% of the fund, from 283 billion kroner. The fund held 58.7% in equities, 41% in fixed income and 0.3% in real estate at the end of the year.