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.