The World's Biggest Wealth Fund Can't Keep Up With the Surging Stock Market

  • Gain in stocks pushed equity holdings toward 70% maximum level
  • Other sovereign funds probably followed suit, JPMorgan says

The stock market is rallying too fast for the world’s biggest wealth fund.

Even though it raised its maximum allocation for stocks to 70 percent this year, Norges Bank ended up paring its equity holdings in the third quarter as the surge in prices sent its stockpile of shares toward the self-imposed limit. The move by the $970 billion fund mirrored those of other pension and sovereign wealth funds that form the backbone of world markets, according to research from JPMorgan Chase & Co.

“Institutional investors with strict allocation targets, such as balanced mutual funds and SWFs such as the Norges Bank, were likely sellers of equities as the strong equity market performance forced them to rebalance to prevent their equity weighting from rising too much above the target,” strategists led by Nikolaos Panigirtzoglou wrote in a report Monday.

Read more: World’s Biggest Wealth Fund in Stock Splurge

Norges Bank is now a net seller this year, with total equity selling of $9.4 billion, according to the report by JPMorgan. The fund sold double the amount of equities in the third quarter it bought in the first half, according to the report.

The fund reported third-quarter results Oct. 27, showing its equity holdings at 65.9 percent of assets, up slightly from 65.1 percent at the end of the second quarter.

— With assistance by Sveinung Sleire

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