Following Major Losses, Norway Sovereign Wealth Fund Hits "Infinity" Pares Exposure To Greek Debt

Tyler Durden's picture

Back in September 2010, Norway's sovereign wealth fund, the second largest in the world, decided to be contrarian for contrarianness' sake, and announced it had "stocked up on Greek debt, as well as bonds of Spain, Italy and Portugal. Finance Minister Sigbjoern Johnsen says he backs the strategy, which contributed to a 3.4 percent loss on European fixed income in the second quarter, compared with gains on bonds in Asia and the Americas." The explanation was one that not even the high priests of obfuscation and lies back in the US, which only invest in "maturity" could come up: "“The point is, do you expect these guys to default?” said Harvinder Sian, senior fixed-income strategist at Royal Bank of Scotland Group Plc, in an interview. “Norway has taken the view that they will not. The Greek holdings are particularly interesting because the consensus in the market is that they will at some point restructure or default. Norway says its long-term perspective will protect it from losses. “One could say we are investing for infinity,” Johnsen said in an Aug. 27 interview. “It is important when you look at the time scope of the fund and the investments that there should be a portion of active management." Less than a year later, infinity appears to have finally arrived. The FT reports that the fund "recently announced plans gradually to reduce exposure to Europe, which currently accounts for half its equity holdings, as part of efforts to increase diversification but Mr Slyngstad said the fund remained bullish about the region in the long-run. However, he acknowledged the “enormous challenge” facing eurozone policymakers and voiced concern over the potential repercussions of a possible restructuring of Greek debts. “It is difficult to see all the secondary effects of such a move and therefore I think there will be a lot of caution before any such decisions will be taken,” he said." But, But... Didn't they say just 9 months ago that there was no risk of Greek default? Perhaps it is a good thing nobody actually holds these gentlemen, or anybody else for that matter, accountable for the outright stupidity they tend to spout on way too many occasions.

More on revisionism 101, and the associated spin of course:

The fund lost nearly a quarter of its value in the market turmoil of 2008, sparking debate in Norway over its investment strategy. All the losses have since been recovered but the fund last year began a push to diversify beyond debt and equity with a £450m real estate investment in London’s Regents Street.

Mr Slyngstad said that, while there would be more real estate deals in future, the fund was taking a cautious approach. “We are not overly enthusiastic about the real estate market for the moment so we are… doing this at quite a slow pace.”

He said the fund would consider further diversification into the infrastructure sector but insisted there were no current plans and highlighted the operational and political risks of such investments.

Norway set up the fund in 1990 to preserve the country’s oil wealth for future generations and guard against inflation by limiting the amount of oil revenues released into the domestic economy.

With assets of NKr3,102bn at the end of the first quarter, the fund is worth about $116,000 for every member of Norway’s 4.9m-strong population.

Just over 60 per cent of the portfolio is in equities and just under 40 per cent in fixed income securities. The fund, overseen by the Norwegian finance ministry, won permission last year to invest up to 5 per cent of its assets in real estate.

In other words, should the central planners fail in their latest attempt to prevent the market from hitting fair values more than halfway lower from here, Norway will be merely the latest entrant in the club which converted hard assets into paper profits and realized losses. As for Greece: its CDS just hit north of 1,600. An all time wide.

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Mae Kadoodie's picture

An idiot says, what?

MarketTruth's picture

Barnum was right, one is born every minute in Norway.

friendly manitoba's picture

might have been  moral suasion and support by norway  - even i buy stuff that may not appreciate but has important consequences in making the world a better place  - a lot of greed in this world where you cant take it with you  -  i remember the day in 1929  j p morgan walked out on the floor and started buying .. doesnt make him a fool in my mind 

some of you posters are wound up pretty tight ...



Djirk's picture

these guys bought US equities when everyone was running away with their tails between their legs....not sure if they took profits but they made a lot of paper profits on that call.

Manthong's picture

An idiot says it's transitory.

Clayton Bigsby's picture

I've heard it said the definition of an "investor" is a trader who's underwater - guess these guys are "investors"

GoinFawr's picture

heh, "underwater", you guys kill me. A whopping 3.4% loss on a portion of their portfolio and you guys are all over it like stink on shit.

You just can't stand to see a mixed economy doing so damn undeniably brilliantly, can you? For you, avoiding mirrors while jumping on any trivial negative news elsewhere is the way to go; oh yeah, definitely...(sarc)

Tylers, thanks for posting this and flushing out all the pigeons... anyone for squab?

Ying-Yang's picture

"At the end of the day", Infinity is sooooo Transitory

TruthInSunshine's picture

Anyone up for a game of Financial Weapon of Mass Destruction Dominos?

These are the special kind of dominos, each one containing derivative products that implicate many other derivative products.

Think of a waterfall of continuously falling razor blades - death by a thousand (or trillions of) papercuts...something along those lines.

Bay of Pigs's picture

One could say we are investing for infinity

Huh? That's a unique approach...

lizzy36's picture

One should remind these Sock Puppets that on a long enough timeline the survival rate for everybody drops to zero. #infinity

Fancy Bear's picture

Warren Buffet always said his favorite holding period is forever.

Mentaliusanything's picture

Tell Buffet I have some Enron shares he can hold for ever (or wallpaper his toilet with)

knukles's picture

Thanks Fancy, for as I was reading the above piece, the phrase "investing for infinity" squared up philosophically and mathematically with the idea of default, of getting naught back.
Like the discounted present value of nothing and any discount rate (perhaps a negative number and therein we approach the extent of the QE efforts) is nothing for infinity.  Cute.
Or, not considering the interim value of an investment between now and infinity seemingly abrogates a considered state of social responsibility commonly enshrined in the law, referred to as "fiduciary responsibility."


Ah, the flimsy ruminations and justifications of the asset manager trapped in a loosing position, embalmed within his own poisonous ego.

williambanzai7's picture

What a marooooooon--Bugs Bunny

Mercury's picture

+1 !

Lots of financial comedy on display in that Ali Baba Bunny

carbonmutant's picture
Little too much Akvavit...
Hedgetard55's picture

They should have at least 20% in precious metals, merely as insurance.


Norwegian krone is a solid currency, relative to
Euro and dollar.

uranian's picture

norway sold all of its gold in 2004:


feee faan. or something.

zaknick's picture

The Norwegian elites are banksters to the core. Northern Norway is where the banksters have built the doomsday seed vault. The same ones who own the GMO monster. Why would they store all the different seeds of the world in a vault inside a mountain?

old naughty's picture

...and under a sheet of ice, in case aircond malfunctioned!


FEMA N. of the 33 parallel.

uranian's picture

there's also the world's only other HAARP-type facility up there, EISCAT.

knukles's picture


Now, I have to ask myself, for WTF do the Norwegians want or need an upper atmospheric heater?

Ah hah!

Another one of those inexplicable coincidences.

Saxxon's picture

Sure, sell all gold and load up on PIIG debt.

A 25% loss in a fund like this is unconscionable.

Another nation whose beaurocrats are Eunuchs busy humping the pants leg of the ECB.

GoinFawr's picture

Is it just me or did you just turn a 3.4% (current) loss on a portion of the fund into a 25% (unrecovered) loss on the whole shebang? Hocus pocus!

You want 'unconscionable'? Have a look at this:

hedgeless_horseman's picture

Perhaps it is a good thing nobody actually holds these gentlemen, or anybody else for that matter, accountable for the outright stupidity they tend to spout on way too many occasions.

Reminds me of this scene (I know, Sweden, Norway, same difference):

My dear friends, for 22 years, in the capacity of [Soveriegn Wealth Fund] manager, I've stood here and made a speech without really having any talent for that sort of thing. Especially if you think of my father who was brilliant at speeches. My only talent, if you can call it that in my case, is that I love this little world inside the thick walls of this [Soveriegn Wealth Fund], and I'm fond of the people who work in this little world. Outside is the big world, and sometimes the little world succeeds in reflecting the big one so that we understand it better. Or perhaps, we give the people who come here a chance to forget for a while, for a few short moments, the harsh world outside. Our [Soveriegn Wealth Fund] is a little room of orderliness, routine, care and love.                                             

                                              -Oscar Ekdahl

                                               Fanny and Alexander

                                               Directed by Ingmar Bergman

GoinFawr's picture

If those Norwegians are 'stupid'

what does that make Americans? Vegetable matter?

Cthonic's picture

On a long enough timeline, you'll never reach infinity...  Zero cred, Mr. Slyngstad.

Mercury's picture

Norway says its long-term perspective will protect it from losses.  One could say we are investing for infinity,

What the hell does that mean? - on a long enough time line the principal recovery rate for everyone rises to 100% ??

I don't think so.

plocequ1's picture

To find out what it means, You sometimes have to play it backwards like Revolution 9 from The white Album.

THE DORK OF CORK's picture

Most goverments now do what they are told by the priestly class - they have no independence.

In a Gold Standard world we would not have these absurd sovergin wealth funds and their useless inefficient transfer of symbolic Energy/Money.

The size of the financial parasitical class used to maintain these fictions is beyond absurd now.

GoinFawr's picture

Uh, I think your extrapolations may need some work.

"The fund lost nearly a quarter of its value in the market turmoil of 2008, sparking debate in Norway over its investment strategy. All the losses have since been recovered..."

I'm not sure the people of Norway agree with you on those first and last points of yours Corky. While the fund shrunk in 2008, it's worth noting that it didn't 'go negative'. Notice there is "debate" on what direction to take, that's an understatement; Norway's SWF is open to public scrutiny and its managers are held accountable, which keeps things as honest as possible.

'Absurd'? How did you come up with that? Look how the country as a whole fared in 2008...

But yeah, when you mess with paper you need to watch out for lit matches.

THE DORK OF CORK's picture

Go negative in what unit of account ? maybe in 2008 Gold but only 2008

The classical gold standard was a product of capital static but productive coal based economies.

The collapse of that system under the pressure of 2 world wars was a direct result of the more fluid nature of economies as oil became the premier energy source for Navies and everything else in the transport sector.

This is about Poltical Power, not about investment returns

GoinFawr's picture

I'll agree that one way to maintain political power is to keep balanced books while providing services like education and health care that are second to none... I'd vote for that administration too, every time. SWF's seem to be one way to do it. 2008 is such old news, check the link for how they fared last year.

(scroll down to 'Debt and Deficit' and see where Norway stands in a league all its own.)

THE DORK OF CORK's picture

No you don't get my point - they are denied Gold ownership in their sovergin fund because in this world of Oil dependence a Gold standard or a high freegold price would transfer most power to countries by nature of their Geology alone.

Americas default of 71 was logical from their perspective - Norway like every other country is compelled to play ball with power.

 Balanced books can be balanced easily when you have a oil surplus.

In this world of the Oil Spice the priestly class have the power alone to smooth the gears of commerce and power politics - hence their dominance in all spheres.

GoinFawr's picture

At one point the US had an oil surplus too, yet I don't recall any balanced books... Canada, tiny population compared to its massive natural resources; aren't they currently exporting more oil than they import? Yet they run deficits too... (Hint: look for the GS alumnis at Central Banks, and 'Conservatives' in the majority-25% of eligible voters can't be wrong!)

Ok, though. I see your point about the gold. Sure, Norway is compelled to play ball, but they play for their own team and judging by performance they're ringers.

A 3.4% loss (they were likely coerced into eating) on a portion of their capital is hardly a reason to throw the baby out with the bathwater, anyway.

Armando Javier Finkeltein of the Boise Finkelsteins's picture

Norway is a small country with 4.9 million with about 7 or 8 blacks, natives and Pakistanis.  The only thing they have is oil and a tradition of surrendering.  They are one of the few countries that do not have a culture.


Vidkun Quisling




Dick Darlington's picture

Maybe they shud actually start doing some own analysis instead of reading the overly optimistic "research reports" coming out of the banking cartel and base their decisions on those. The same analysts who have recommended buying all and any peripheral bonds throughout the crisis have not stopped doing so even 3 countries have already fallen off the wagon. Quite a track record... Or then again, they must do their "analysis" on an infinite time horizon so default here and there along the way is no biggie.

urbanelf's picture

I'm starting a hedge fund with the strategy of placing bets on Roulette hedged by bets on Craps.  Any takers?

Sudden Debt's picture

I'm guessing you have a bulletproof system SO PUT ME IN FOR 50K ON RED!

and if it goes bad, just write me some IOU's for the tripple of the amount untill it goes red...


ATM's picture

They did it on purpose.

Caviar Emptor's picture

The parade of stuck perma-bulls is  getting could this be? We followed Buffet's advice and listened to Jack Welch and bet the farm on Helicopter Ben! This can't be happening!

rufusbird's picture

I guess this tells us they don't think they can safely insure their position with credit-default swaps...? I guess they don't share Wall Street's enthusiasm for the products...