Norway Oil Fund Has Record Quarterly Drop on Stocks

Norway Oil Fund Has Record Quarterly Drop on Stocks

Nov. 25 (Bloomberg) -- Norway's sovereign wealth fund, the world's second largest, suffered its biggest quarterly decline as the worst financial crisis since the Great Depression battered global stock markets.

The Government Pension Fund - Global's investments fell 7.7 percent in the third quarter as measured by a weighted basket of currencies, Norway's central bank said today. The fund lost 13.1 percent on stocks and 1.2 percent on bonds, resulting in the biggest quarterly decline since its inception in 1996.

The fund's ``robust long-term strategy makes me sure that its investment will over time generate a good return within an acceptable level of risk,'' Finance Minister Kristin Halvorsen said today in a statement. The government also pumped a record 128 billion kroner ($18.2 billion) into the fund in the quarter.

Global stock markets plunged in the period amid an economic recession. The MSCI World Index fell 16 percent in the quarter and Europe's Dow Jones Stoxx 600 Index slumped 12 percent. Halvorsen on Nov. 10 said 2008 will be a ``year of losses'' for the fund, built on Norway's oil and gas revenue. Norway is the fifth-largest oil exporter and the third-largest gas exporter.

The fund, worth 2.12 trillion kroner at the end of the quarter, invests oil money abroad to avoid stoking domestic inflation. The fund lost 1.8 percentage point more than a benchmark set by the Finance Ministry. Norway's central bank runs the fund, while the Finance Ministry sets guidelines

Shifting Focus

The fund is shifting from fixed income to stocks and other investments to get higher returns. The fund is moving to 60 percent of its assets in equities, up from 40 percent, and seeks to have 35 percent in bonds, rather than 60 percent. It had 53 percent of its holding in stocks at the end of the quarter.

HSBC Holdings Plc, Europe's biggest bank, is the fund's largest stock holding, worth 14 billion kroner. German bonds are the biggest bond holding, at 108 billion kroner.

The Norwegian fund will begin investing in real estate next year and is adding emerging markets such as Russia, India, China and Egypt to its investments. The fund also loosened its policy on stakes in individual companies, allowing a holding as large as 10 percent in single companies, up from 5 percent.

The Abu Dhabi Investment Authority is world's the largest sovereign wealth fund.

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