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Norway's SWF Posts a 5.4% Loss in Q2
ai5000 reports, Norway's SWF Posts Q2 Loss Due to European Debt Crisis, BP Spill:
Norway's fund dropped $25 billion in the second quarter, pummeled by the European debt crisis and BP's downturn after the Gulf of Mexico spill.
The
Government Pension Fund Global, Norway’s sovereign wealth fund
commonly known as the "oil fund", lost 155 billion kroner ($25 billion)
or 5.4% in the second quarter, representing the first drop since the
start of 2009.
The single
worst-performing investment for the world’s second largest SWF: oil
producer BP. The company’s oil spill in the Gulf of Mexico in April,
the largest spill in US history, slashed BP’s share price in half
during the period. Following the oil disaster, the fund said oil majors
have the potential to improve environmental safety standards,
indicating that it was seeking a greater effort by the oil industry.
"This is an industry-wide issue and the industry needs the larger
players with the best resources (to achieve this)," said Yngve
Slyngstad, chief executive officer of Norges Bank Investment Management
(NBIM), which manages the fund, in a Reuters interview.
“The
spill put the spotlight on safety standards in the oil industry,” says
Slyngstad. “NBIM supports the board of BP’s commitment to ensure that
safe and reliable operations top the company’s set of priorities. We
also seek a wider industry effort that should be led by the largest
companies to improve safety and environmental standards.”
Additionally,
Norges Bank said Friday that the fund’s equity investments returned
-9.2%, while fixed-income investments returned 1%. The fund’s
investments consisted of 59.6% equities and 40.4% fixed-income
securities at the end of the quarter.
Despite
the loss, the fund grew year-on-year to 2.8 trillion kroner ($455
billion), from 2.4 trillion kroner, central bank data showed.
Emma Rowley of the Telegraph reports, Norway takes £860m hit over BP oil spill:
Government
Pension Fund Global , which funnels tax revenue frosm the country's
oil and gas into foreign investments, said the crisis-hit company was
its single worst-performing investment.
The BP shareholding fell from 18.9bn kroner (£1.96bn) to 10.6bn kroner, representing a drop of around £860m.
"We've had more than 1pc of our stock holdings invested in BP and this
share halved in value," said Yngve Slyngstad, head of Norges Bank
Investment Management (NBIM), which oversees the fund.
The
loss reignited fears for the impact of BP's troubles on UK pension
funds, which typically have 1.5pc of their assets in the oil giant,
according to the FairPensions charity.
Norway's fund also saw worries over high sovereign debts and another
economic slowdown send other stocks falling across Europe, where it
has around half its equities.
Nonetheless Mr Slyngstad said the fund had increased its exposure to Europe during the period.
"So our assessment of the situation has become more positive during the second quarter," he said.
Overall, the fund's 5.4pc decline in investments represented a 155bn kroner loss.
Around 60pc of the fund's investments were in shares and the rest in
debt, a slight change from the previous three months, when shares
made up more than 62pc.
Equities ended down 9.2pc, while fixed-income investments returned 1pc.
However the weak Norwegian currency and a fresh influx of capital from
the government helped the fund's value rise 29bn kroner to 2,792bn
kroner in the three months to the end of June.
The
wealth fund, the world's second largest after the United Arab Emirates,
only invests abroad to avoid overheating its economy and to shield
it from oil price changes.
In the wake of
April's spill into the Gulf of Mexico, Mr Slyngstad called for an
"industry effort" led by the biggest companies to improve safety and
environmental standards.
"It is only the oil majors that
can take on the task of focusing and developing further the
environmental safety standards," he told Reuters.
"This is an industry-wide issue and the industry needs the larger players with the best resources (to achieve this)."
Separately, he said energy-intensive companies were doing too little to
combat climate change, with chemicals and transport firms bottom of a
new survey by the fund.
You can learn more on NBIM by going to their website, read about their investment mandate and read the entire Q2 report by clicking here. I quote the following from page 11:
Volatility
in equity and fixed-income markets increased in the second quarter
because of uncertainty about European government debt, funding
challenges for banks and fears of an economic slowdown, particularly in
Europe. The VIX index, which measures expected volatility in the U.S.
stock market, doubled during the quarter to levels seen at the end of
the financial crisis in spring 2009. The iTraxx Europe index, which
measures risk in the European bond market, rose by 50 basis points to
129 basis points.Expected absolute volatility, measured by the
statistical concept standard deviation, uses historical price movements
in the fund’s investments to estimate how much the fund’s annual return
can be expected to vary in normal periods. At the end of the second
quarter, the fund’s return was expected to vary 9 percent, or 250
billion kroner, per year. That compares with 7.2 percent at the start of
the quarter.The Ministry of Finance has set limits for how much NBIM may deviate from the benchmark portfolio in its fund management.
The
most important limit is expressed as expected tracking error (relative
volatility) and puts a ceiling on how much the return on the fund can be
expected to deviate from the return on the benchmark portfolio.
Expected tracking error must not exceed 1.5 percentage points (150 basis
points). The actual figure was 0.38 percentage point at the end of the
second quarter, up from 0.32 percentage point at the start of the
quarter. The increase was mainly due to higher risk associated with
government debt and covered bonds.In addition to limiting risk
in the fund, the Ministry of Finance has set other guidelines for the
fund’s management. There was one minor breach of these guidelines in
the second quarter.
Given the volatility in Q2,
it's pretty amazing that there was only one minor breach of guidelines.
Keep an eye on Norway's sovereign wealth fund (SWF) as it represents an
increasingly important source of global liquidity. In fact, large
sovereign wealth funds are providing lots of liquidity to global markets
which many analysts tend to ignore, much to their detriment.
»
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I guess it's back to dried cod and homemade beer for the Norskis. As my old granny used to say: Skroot!!!
Careful with the cod !
Norway: Police To Investigate “Monster Fish”Updated DOW and SP500 charts:
http://stockmarket618.wordpress.com
Interesting infromation Leo. Thanks for the post...
Another question: I show that Norway runs both a budget surplus and a trade surplus. What the hell do they *need* to be in stocks for anyway?
Reaching for return they don't really need is the definition of imprudence.
@ZackAttack: "Another question: I show that Norway runs both a budget surplus and a trade surplus. What the hell do they *need* to be in stocks for anyway?"
The budget surplus is pure illusion.
Take away the subsidies from the oil revenue, and the current budget has a deficit of (about) NOK 130bn. The government keeps increasing their use of oil money to balance the budgets, at the same time increasing public spending as the oil revenue is slowley fading away.
(Ever heard about "The Dutch Disease" ?)
As for the investments through the Oil Fund; imagine what would happen to the Norwegian economy if they pumped all those billions into the system....
The stupid fact is that Norway has developed the highest expertise in the world when it comes to transforming oil into money, but has no clue to what to do with it all...
Some have seriously suggested to give it all away.
I have proposed to let Goldman Sachs manage the money - at least they now how to handle the stuff....
Whow, late hours trx....
FWIW and probably not a lot, my reply to your reply a bit further up
by LMAOon Tue, 08/17/2010 - 01:48
#525003
Not to worry Zack,
The world is looking for bagholders and Norway will take the #1 position there as well.....They will piss it all away!LMAO
Laugh all you want but Norway is doing the prudent thing by using its oil revenues to make diversified investments in stocks & bonds all around the world. The same goes for other SWFs which are also investing in alternatives like hedge funds, PE and RE. What would you do if you had billions to manage? Leave it in cash? C'mon, let's get serious here.
Oh Yeah, that's right.....who do you think shorted the banks on Iceland as they went down one by one?
Which SWF (or hedge fund) consequently refuse to buy gold?
And which SW funds will do best in the future? Those who invest for profit, or those who invest for political reasons?
Now, let's get serious...
Good grief Leo, get a grip!
You are making it sound that Norway has no other options than pissing away their money in the equity and bond casino!
There are more than enough problems and issues to be addressed in Norway which are much more important and could put a good deal of this money to much better use.
Norway is investing (gambling) everywhere, but not and never in Norway itself or to the benefit of the people who have to live in this godforsaken place.
LMAO
Investing in stocks/bonds vs. leaving it in cash aren't the only two choices. That money exists for the betterment of Norway's citizenry, not a plaything for FIRE.
No reason, for example, they couldn't invest in additional oil e&p.
Oil's been a 6-bagger over the decade. Have world stocks?
Small side bet that Statoil's 25% stake in the Jack/Jack II fields has a better ROI than, say, the Vanguard Total World Stock Index over the next 10, 20 years?
Just one example. The winners are going to be the nations that can feed and fuel themselves.
Soon the English acsent will lose its cashe and ve vill be speeking ruuske or Chinese
So, let's review...
Britain and Norway, two different approaches to North Sea oil reserves.
Norway treats its North Sea claims as a public resource. Winds up with the world's largest SWF, the highest standard of living in the world (per 2009 UN report: http://news.bbc.co.uk/2/hi/in_depth/8290550.stm). The state oil company is still a net oil exporter, with one of the best safety records in the world.
Britain leaves its reserves in private hands. Winds up broke, with a few Branson-esque billionaire assholes, a falling standard of living (25th, with a lead balloon: http://www.telegraph.co.uk/finance/personalfinance/6943343/Britains-quality-of-life-worse-than-former-Communist-countries.html) and is now a net petroleum importer.
Hmmm...
+1111 Zach...
"Britain and Norway, two different approaches to North Sea oil reserves."
If Norway could only...
1. Invent a City of London Bankster fraud sector...
2. Develop a ponzi "physical" bullion market...
3. Form a rabid cult of personality over some inbred, moronic "royals"...
Then the Norwegian people, too could be broke...
Thank you, Leo.
Too few folks either watch, report or for that matter consider that reporting and analyses of the type you do to be a looking into the very soul of truly large institutional money balances. Which they also fail to recognize, are frequently backed by the taxing power of the sponsor governmental entities and managed at some level by political appointees.
Hence the importance of monitoring the stock and flows of funds as well as integrity and transparency of the organizations.
Keep up the good work.
Allow me to supply a little twist of additional informaton:
The Fund lost NOK 8bn on BP, but the total loss was 155bn.
Wonder where the rest of the losses are?
More than 10% is invested in the PIGS countries:
"The fund have placed 22 billion in the Spanish bank, Banco Santander, witch has lost 25% of its market value since January. In Greece the Norwegian Pension Fund have invested NOK 16,2 billion – 10,2 in bonds and 6,4 in equities. The total Norwegian PIIGS exposure seems to be in the neighborhood of NOK 350 billion – including banks, insurance companies and their foreign subsidiaries."
Here’s The REAL Norwegian PIIGS Exposure
Almost 50% of the Funds equities are invested in the Chinese stock market:
"The Chinese stock market entered officially a so called “bear market” yesterday after the Shanghai Composite Index have declined over 20% since the peak in November last year – and so did Norwegian pensioners with nearly 50% of its NOK 2,7 trillion pension fund invested in Chinese equities."
Norwegian Pensioners Enter Bear Market
The Fund lost amout 9% on equities in Q2 - the MSCi World Index was down 6% in the same periode.
However, that't not the Norwegian Oil Funds real problem:
Norway's oil wealth is used to ensure active ownership in the world's water reserves, and otherwise helping to save the world.
The reality is quite different than the polticians and the Funds management portraiy in their reports.
According to studies in progress at the University of Oxford, it is primarily private investment companies (private-equity companies), major investment banks and hedge funds that make money on the government funds' increasing investments.
And the political management of the SWF is not popular.
Gordon L Clark og Ashby H. B. Monk have interviewed 146 experienced managers from the United States, England, Canada and Australia who routinely have contact with state investment funds.
* 62% do not think a country's government should have any influence on the fund's investment decisions.
* A majority of 38% said they do not fit that the Fund will report directly to the political leadership.
* Only 30% believe the internal resources of the SWF one is adapted to the requirements of the global market requires.
* Experts call for more transparency and greater investment freedom. Not least, do the managers emphasized that there must be a joint investment rules for all funds of this type to quell unrest among the other investors for what these funds may eventually do.
* And on the question whether it is important to have a relationship with the government in OECD countries - such as Norway, Ireland and Australia - to get a mandate from their public funds, answer a majority of 40 percent "agree".
There is no doubt that both the Norwegian Governmental Pansion Fund, and other state funds, will be bigger, more powerful and more important in the world economy going forward.
The competition between them will increase. Some countries already planning to merge their state funds to increase to meet demand for public funding.
This is the reality the Norwgian Oil Fund, the government and the people of Norway must deal with.
So far they have not.
Well, as I said, just a slightly different view on the case....
Cheers trx,
It seems like I'm bumping into you each time there are comments concerning Norwegian investment funds and fucknut Norwegian politicians here on ZH. As to your frequent linkage, are you by any chance connected to the "Econotwist's Blog"?
Are you familiar with Norwegian "Liberatorium" and his comments on markets, life and liberty? You may find some topics which are of interest.
http://twitter.com/liberatorium
Regards,
LMAO
Your suspicion are hereby confirmed....I'm the stubborn bastard behind the Econotwist's Blog (and a few other related sites).....
(Thanks for the tip on Liberatorium. Just checked in out - seems interesting.)
I've been working with the financial industry in Scandinavia/Europe for more than 20 years, seen a few crisis come and go, and how the politicians and the central banks operate.
However, over the last couple of years, I've become increasingly skeptical to the so-called "Nordic Model."
I've found that several countries are hiding their budget deficits, manipulating statistcs and holding back important information of public interest.
Pointing out that we're sitting on one of the greatest housing bubbles ever, a ticking unemployment bomb and an environmental disaster just waiting to go off in the North Sea.
In February 2007 I wrote a series of articles about the upcoming collapse in the financial markets (credit derivatives), resulting in nearly 2.000 hate-mails and almost just as as many angry phone calls.
After the Lehman-incident, Norwegian financial authorities held a press conference saying that Norwegian banks were rock solid, and that the US crisis would have little impact on Scandinavia. I responded with a commentary called "Three Bubbles And One Bank."
Three days after publishing the piece, the Norwegian government pulled a NOK350bn bailout package out of the hat (so that DnB NOR could make the biggest illegal insider trade ever in the nations history).
A few other highlights:
* The Norwegian bank has managed to become "too-big-to-fail" with about 80% of the domestic market share, a key financier to the Baltic countries and the second biggest provider of loans/guaranties to the international offshore industry.
* The three Scandinavian central banks have established a backdoor bailout scheme to cover the Nordic banks losses in the Baltic area. (No one - except for the Latvian finance ministry - are willing to comment on this matter).
* Norway's PM and DnB NOR's CEO is close friends. These two - and the director of The Norwegian Financial Authority - are all members of the same political party.
* DnB NOR is the primary lender to the notorious motorcycle gang Hells Angles.
* Scandinavians are amongst the most indebted people in the world. (They have more debt per capita than Americans).
* 200.000 Danes are technically insolvent.
* The reason the unemployment rate is low, is that almost 30% of the population are living on various kinds of public benefits, like early retirement or disability support.
* As for Mr. Slyngstad, the Oil Fund and the Central Bank of Norway; they now consequently refuse to answer my questions after a series of critical articles about their management - in particular; their risk management.
I think I better stop now....this really gets me going, as you see...haha..:-)
Anyway - here's the latest update on Scandinavia from Saxo Bank:
Housing Bubbles In Australia, Canada, Norway, Sweden Worse Than In USA"I think I better stop now....this really gets me going, as you see...haha..:-)"
I know how you feel and I must conclude that as far as the DNB Nor scandal, the oil fund, Mr Slyngstad and the Norwegian banking / financial system are concerned we probably see eye to eye on these topics. Don't get me even started when it comes to politicians and the Nobel Peace Prize committee.
The biggest problem in todays' Norwegian society is ignorance which is a direct consequence of ridiculous high levels of complacency.
I checked out the econotwist blog and I will be checking in again.
Please tell Mr. Lerø to stop this Giske PM candidate bollocks. He is a fascist pig rallying the troops already now. If he ever comes to power the Norwegian sheeple are well and truly fucked. Fredriksen and Røkke amongst others will be lining their pockets big style sucking up all of the remaining Oil fund liquidity.....Well if there is anything left by the time Slyngstad is done that is....
LMAO
Hehe...yeah, I think we see things pretty much the same way....
And you do have a point with the level of complacency. But if I take that further, I'll probably loose my citizenship....
When it comes to Mr.Lerø, who is a good friend of mine, I respect his opinions.
However, I can assure you that Trond Giske never will become PM of Norway. I believe his political career will be over in a couple of years. What he's doing now is positioning himself for a nice high profile job in Norwegian industry when that day comes.
But after his hillarious comment last week, he probably blew that chance, too:
"Sometimes I think that such people should try to eat their shares and see how long they could survive."
(In response to new statistics showing that people working in the financial industry are creating more value than people elsewhere).
Cheers !
http://e24.no/makro-og-politikk/article3768548.ece
And of course Mr. Slyngstad is on behalf of the Norwegian taxpayer increasing overall exposure in the most risky bonds which currently are available on the market. Anything related to the screaming PIGS must be "Gold" in the pursuit of higher Yields according to Mr. Slyngstad.
"And how high is the probability Mr. Slyngstad that Spain and Greece actually will repay these debts in which you now so willingly are increasing your stake?"
Mr. Slyngstad: " I don't give a fuck! The sheeple don't know what's going on, the politicians are clueless and it's an excellent vehicle to generate all kinds of Bonuses to all my friends and financial cronies involved. It's not like I'm using my own money to begin with. It's not like I ever will be held accountable. I'm just digging blindly and hope to stumble across a gold mine. I'll be a hero if I do.....If I don't? WTF do I care! I'll be well and settled by that time"
Yes, Norway will be pissing it all away, courtesy of the likes of Slyngstad.
LMAO
"Sovereign Wealth Fund?"
How quaint! The silly Scandis actually hold actual assets instead of a drawer full of IOUs?
Sovereign wealth. Obviously a foreign concept.
Uff Da!
http://en.wikipedia.org/wiki/Uff_da
http://www.lawzone.com/half-nor/uffda.htm
Tom Einar?