Norway Wealth Fund Turns ‘Cautious’ on Stocks After Trump RallyBy and
Fund CEO says more comfortable when markets are ‘stressed’
Fund’s stock holdings rose to almost 65% of portfolio in 1Q
Norway’s $915 billion wealth fund is now turning “cautious” on global stock markets after reaping the benefits of a global rally over the past two quarters fueled by rising economic optimism.
“We’re cautious in the current market circumstances and we’ve had a very nice run in our equity returns since last summer,” Yngve Slyngstad, chief executive officer of Norges Bank Investment Management, said in an interview after a press conference in Oslo. “We always have the view that we feel more comfortable when markets are stressed than when markets are buoyant.”
The world’s largest sovereign wealth fund on Friday reported it gained $35 billion in the first quarter, boosted by the biggest quarterly rally in global stocks in more than three years. The surge pushed its stock holdings to almost 65 percent of its portfolio and comes at a time when parliament is about to start debating whether to raise the stock exposure to 70 percent.
Global stocks rose in the quarter, helped by a rally in the U.S., where investors anticipating President Donald Trump growth programs pushed the benchmark S&P 500 higher for six weeks. This in turn spilled over to Europe, though markets are now showing signs of losing momentum.
The fund’s stock portfolio rose 5.5 percent in the quarter, its bonds gained 0.8 percent. The real estate holdings climbed 0.5 percent.
The world’s biggest sovereign wealth fund invests globally and largely follows indexes, but has been moving out of Europe and more into emerging markets over the past years to generate higher returns. It held 64.6 percent in stocks in the quarter, 32.9 percent in bonds and 2.5 percent in properties. Its mandate is to keep about 60 percent in stocks, 35 percent in bonds and 5 percent in real estate.
The government withdrew 23 billion kroner from the fund in the first quarter.
In February, the government proposed to increase the stock portion in the fund to 70 percent from about 60 percent today, and also to tighten the 16-year-old fiscal policy rule to 3 percent of the fund’s value to limit withdrawals.