Norway’s sovereign wealth fund, the world’s second largest, said it may be able to gain from the turmoil in debt and stock markets after last year cutting its holdings in Greece, Spain and Portugal.
“We see market turmoil as an opportunity and not as a threat,” Yngve Slyngstad, head of Norges Bank Investment Management, the central bank’s asset management arm, said in an interview in Oslo today. The fund may hold off making its first real estate investments in anticipation property prices may decline, he said.
Stocks have plunged on concern over European government finances after a bailout of Greece and speculation Spain and Portugal will also need support. The MSCI World Index has lost 10 percent since reaching a 19-month high on April 15 and Greek and Spanish bond yield premiums to German debt today climbed to the highest since the euro’s introduction in 1999.
The 2.76 trillion-krone fund, Europe’s largest stock investor, cut its holding in Greece, Portugal, Spain and Italy over the past year. It held 55 billion kroner ($8.8 billion) in debt of the four countries at end of 2009, down from 132 billion kroner at the end of 2008. That holding was not “significantly changed” in the first quarter, Slyngstad said today.
The fund, called the Government Pension Fund Global, today reported a 3.9 percent return in the first quarter as stocks rose at the start of the year, adding to last year’s record gain. A plunge in global stocks in 2008 wiped out gains since it started investing Norway’s oil and gas revenue in 1996. It recouped most of the losses in 2009 and gained 103 billion kroner in the first quarter.
“As an investment organization we have now more experience and are therefore better prepared for potential market turbulence,” said Slyngstad, who was named head of the fund in January 2008.
The fund is built from Norway’s oil and gas revenue and gets its investment guidelines from the government. Earlier this year it got approval from the Finance Ministry to invest as much as 5 percent of its value in real estate.
“A difficult situation in the bond market may make the opportunities in the real estate market better,” he said. “Quite a few real estate companies and real estate owners need to refinance their debt, therefore we think there can be better opportunities in the future.”
The fund today named Karsten Kallevig as its head of real estate investments from Sept. 1. He headed the Japanese office of Grove International Partners and also worked at Goldman Sachs Group Inc.’s Whitehall Street Real Estate Funds.
Only Abu Dhabi has a larger sovereign wealth fund, according to the Sovereign Wealth Fund Institute in California. A sovereign wealth fund is a state-owned fund with assets such as stocks, bonds and real estate.