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Norway wealth fund to cut European exposure - FT.com

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  • Arno Mong Daastoel
    Dear Michael, As usual, they are (too) latecomers. ;-) Arno
    Message 1 of 2 , Mar 31, 2012
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      Dear Michael,

      As usual, they are (too) latecomers.
      ;-)

      Arno


      http://www.ft.com/intl/cms/s/0/81286ed4-7a51-11e1-839f-00144feab49a.html?ftcamp=published_links/rss/markets_equities/feed//product#axzz1qh5zU5UU

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      March 30, 2012 11:26 am

      Norway wealth fund to cut European exposure

      By Richard Milne in Oslo

      Norway’s sovereign wealth fund, one of the largest investors with 2 per cent of Europe’s equities, is set to cut its exposure to the continent and boost it in emerging markets.

      Europe would see its share of the $600bn fund fall from 60 to 40 per cent in bonds and from 50 to 40 per cent in equities, under plans presented by the Norwegian government on Friday.

      The move by the fund, which is financed by revenues from Norway’s oilfields, comes amid the eurozone sovereign debt crisis that has seen the continent become less attractive for international investors.

      It reported its third worst annual loss earlier this month as fallout from the debt crisis cost it $15bn.

      Hilde Singsaas, state secretary in Norway’s finance ministry, denied that the reduced weights for Europe represented a vote of no confidence in the continent.

      “The crisis in Europe wasn’t a topic,” she said at a presentation of the government’s latest white paper for the state pension fund.

      Instead, the government is trying to bring Europe’s weight in the fund, whose assets are expected to double in the next decade to $1.2tn, closer to a market level.

      Ms Singsaas said that if strict weightings based on market capitalisation were used, Europe should only represent 25 per cent of equities.

      “In our view, that would be too dramatic,” she said.

      The reduction in its bond portfolio is due to its changing allocations from being based on debt to GDP, an approach that wins favour from many academics and investors who argue that current bond benchmarks favour heavily indebted countries such as Japan, the US and Italy.

      Emerging markets are the big beneficiaries of the Norwegian move. For the first time, the fund would invest in emerging market debt, which would end up accounting for 7 per cent of its portfolio. In equities, its share would rise from 9 to 12 per cent.

      The US would also benefit from the move.

      Norway’s fund owns slightly more than 1 per cent of global equities and 2 per cent of European equities, with both proportions growing rapidly.

      The finance ministry’s proposals will be debated this summer by parliament, but it is expected to approve the moves after agreeing to a shift to GDP and market weightings last year.

      Previously, the government had justified the high proportion devoted to Europe by trade flows, but it now says a study revealed that the fund’s currency risk was much lower than thought, allowing it to change the asset allocation.

      Ms Singsaas declined to comment over how long it would take the fund to make the shift to the new allocation.

      She said strong inflows from oil money, which last year were about $48bn, would mean much of the rebalancing away from Europe could be done without selling existing assets. But some selling might be necessary, she said.

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      1. Report Longterm View | March 30 10:00pm | Permalink
        Disagree with Greybeard. Of course, its interesting that the Norwegian SWF is investing in EM. However, its certainly more interesting (at least to me) that Europe is slowly losing its capital base. The result of the Greek restructuring and the loss of credibility will have long term geopolitical implications, which seem quite relevant.
      2. Report Doubting Thomas | March 30 5:50pm | Permalink
        You are so right, 'The real greybeard'.

        The on-going financial crisis will exact a heavy toll and amongst others one casualty would be fair reporting and objectivity of the media.

        Come to think of it, FT boasts of being a 'high quality global journalism'! Had it not been for the opportunity to read the informed and intelligent comments by its readers, I would have stopped my subscription of FT long back. Often I wonder at the yawning gap between what FT professes and what its readers think; to me while the former articulates the reigning thought system, the latter resonates the pulse of the main street. Many a time I just cannot resist the temptation to go to the readers' comments first and then to the article itself. I would not be exaggerating if I say I learn more from the readers of the FT than FT itself.
      3. Report The real greybeard | March 30 11:54am | Permalink
        Another one of these FT headlines. Better would have been "Norway's sovereign wealth fund to increase investment in developing economies". It would be more accurate and less loaded with a political or editorial agenda that I, for one, do not need.

        Sounds like a sensible move and, if anything, overdue.


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    • Michael Hudson
      Just as the BRICS meeting in India denounces the flood of foreign credit to destabilize their economies! Hopeless! Michael ... Re: [gang8] Norway wealth fund
      Message 2 of 2 , Mar 31, 2012
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        Re: [gang8] Norway wealth fund to cut European exposure - FT.com Just as the BRICS meeting in India denounces the flood of foreign credit to destabilize their economies!
            Hopeless!
            Michael


        On 3/31/12 10:30 AM, "Arno Mong Daastoel" <amd@...> wrote:


         
         
           

           Dear Michael,
         
         As usual, they are (too) latecomers.
         ;-)
         
         Arno
         
         
        http://www.ft.com/intl/cms/s/0/81286ed4-7a51-11e1-839f-00144feab49a.html?ftcamp=published_links/rss/markets_equities/feed//product#axzz1qh5zU5UU
         
         Ts&Cs <http://www.ft.com/servicestools/help/terms>  and Copyright Policy <http://www.ft.com/servicestools/help/copyright>  for more detail. Email ftsales.support@... to buy additional rights. http://www.ft.com/cms/s/0/81286ed4-7a51-11e1-839f-00144feab49a.html#ixzz1qhkCdhVC
         
         
         
         

         March 30, 2012 11:26 am
         
        Norway wealth fund to cut European exposure


         By Richard Milne in Oslo
         
         
         
         

        Norway’s sovereign wealth fund, one of the largest investors with 2 per cent of Europe’s equities, is set to cut its exposure to the continent and boost it in emerging markets.
         

        Europe would see its share of the $600bn fund fall from 60 to 40 per cent in bonds and from 50 to 40 per cent in equities, under plans presented by the Norwegian government on Friday.
         

        The move by the fund, which is financed by revenues from Norway’s oilfields, comes amid the eurozone sovereign debt crisis that has seen the continent become less attractive for international investors.
         

        It reported its third worst annual loss <http://www.ft.com/cms/s/0/18c55068-6f62-11e1-9c57-00144feab49a.html>  earlier this month as fallout from the debt crisis cost it $15bn.
         

        Hilde Singsaas, state secretary in Norway’s finance ministry, denied that the reduced weights for Europe represented a vote of no confidence in the continent.
         

        “The crisis in Europe wasn’t a topic,” she said at a presentation of the government’s latest white paper for the state pension fund.
         

        Instead, the government is trying to bring Europe’s weight in the fund, whose assets are expected to double in the next decade to $1.2tn, closer to a market level.
         

        Ms Singsaas said that if strict weightings based on market capitalisation were used, Europe should only represent 25 per cent of equities.
         

        “In our view, that would be too dramatic,” she said.
         

        The reduction in its bond portfolio is due to its changing allocations from being based on debt to GDP, an approach that wins favour from many academics and investors who argue that current bond benchmarks favour heavily indebted countries such as Japan, the US and Italy.
         

        Emerging markets are the big beneficiaries of the Norwegian move. For the first time, the fund would invest in emerging market debt, which would end up accounting for 7 per cent of its portfolio. In equities, its share would rise from 9 to 12 per cent.
         

        The US would also benefit from the move.
         

        Norway’s fund owns slightly more than 1 per cent of global equities and 2 per cent of European equities, with both proportions growing rapidly.
         

        The finance ministry’s proposals will be debated this summer by parliament, but it is expected to approve the moves after agreeing to a shift to GDP and market weightings last year.
         

        Previously, the government had justified the high proportion devoted to Europe by trade flows, but it now says a study revealed that the fund’s currency risk was much lower than thought, allowing it to change the asset allocation.
         

        Ms Singsaas declined to comment over how long it would take the fund to make the shift to the new allocation.
         

        She said strong inflows from oil money, which last year were about $48bn, would mean much of the rebalancing away from Europe could be done without selling existing assets. But some selling might be necessary, she said.
         
         High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs <http://www.ft.com/servicestools/help/terms>  and Copyright Policy <http://www.ft.com/servicestools/help/copyright>  for more detail. Email ftsales.support@... to buy additional rights. http://www.ft.com/cms/s/0/81286ed4-7a51-11e1-839f-00144feab49a.html#ixzz1qhkMuTUh
         
         
         
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