Norway’s $750-billion government pension fund says its investment returns in the second quarter of 2013 were dragged lower by weak performance of Indian stocks, where it has a significant exposure.
The Norway fund had increased its exposure to Indian stocks by about 38 per cent to close to $2.57 billion across 120 companies last year, but poor performance of equity markets in India has acted as a dampener so far in 2013.
In the quarterly update for its investment portfolio, the fund said that India and Japan were the worst performers in terms of returns, while US and Germany investments acted well in the quarter ended June 30.
While Indian stock market’s benchmark index Sensex slipped by just 0.6 per cent in this period, the fall was much higher at about 6 per cent each in mid-cap and small-cap stocks.
“Sorted by country, US and German stocks contributed most to the excess return, while investments in Japan and India made the largest negative contributions,” said Thomas Sevang, Team Manager — Communications and External Relations, Norges Bank Investment Management (NBIM).
NBIM is the asset management unit of the Norwegian central bank (Norges Bank). NBIM manages the Government Pension Fund Global, which is often referred to as the Norwegian oil fund.
Replying to an emailed query regarding the negative returns earned by the fund from Indian investments, Sevang, however, did not disclose the extent of losses due to Indian stocks citing policy of not commenting on specific markets.
Investments in debt, equity
The Norwegian fund had also ramped up its exposure to Indian debt securities floated by the Government of India, Indian Oil Corp and State Bank of India to over $1 billion in 2012, from just about $150 million at the end of 2011.
The fund has about 63.4 per cent of assets invested in equities, 35.7 per cent in fixed income and 0.9 per cent in real estate.
In the second quarter, its equity investments returned 0.9 per cent and fixed-income investments logged a negative 1.4 per cent. However, the return on these investments was 0.3 percentage point higher than the return on the benchmark indices. Investments in realty returned 3.9 per cent for the giant fund in this period.
Norway had set up this fund in 1990 as a fiscal policy tool to support long-term management of the government’s petroleum revenue. Norway regularly transfers its petroleum revenue to the fund, which makes further investments in international equity and fixed-income markets and real estate.