Norway Oil Fund Chief Warns on Bonds With Returns Close to Zero

The head of Norway’s sovereign wealth fund, the world’s biggest, said the bond market will offer scant returns as the investor looks to expand into other asset classes to safeguard the nation’s wealth.

“Returns in the bond markets are low and look to remain so for a good while ahead,” Yngve Slyngstad, chief executive officer of the $780 billion Government Pension Fund Global, said today in a speech in Bergen published on the central bank’s website. “The safest investment alternative gives today a return after inflation close to zero.”

Norway, western Europe’s largest oil and gas producer, generates money for the fund from taxes on oil and gas, ownership of petroleum fields as well as from its 67 percent stake in Statoil ASA, the country’s largest energy company. The fund, which has an average holding of about 1.2 percent of the world’s listed companies, invests abroad to avoid stoking domestic inflation.

Europe’s biggest equity investor, which gets its guidelines from the government, held 63.4 percent in stocks in the second quarter, up from 62.4 percent in the first quarter.

Its bond holdings slid to 35.7 percent from 36.7 percent of the fund while real estate comprised 0.9 percent. It’s mandated to hold 60 percent in stocks, 35 percent in bonds and 5 percent in real estate. The fund is undergoing a shift in strategy to capture more global growth. It is moving asset allocation away from Europe as emerging markets in Asia and South America gain a bigger share of global output.

“Over time it will be natural to be open for investment in more asset classes,” he said.

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