Norway’s SWF Dumps More Euro Debt Amid Uncertainty in Europe
Posted on 05/07/2012
French Socialist Francois Hollande was elected President of France. Hollande is France’s first Socialist president in 17 years and institutional investors are concerned since he calls for less austerity. At the same time Greek votes migrated to political parties who professed an anti-bailout dogma. From a public investor standpoint European sovereign risk will be mounting in the next couple of weeks until there is some clarity in policy and goals. The looming question is the future of the Euro and the clashing of policies between Germany and France.
How does this affect sovereign wealth funds in the short-term to long-term in asset allocation decisions?
Norway’s GPFG Select European Sovereign Debt Exposure
| Country | Holdings in US Dollars |
|---|---|
| France | 13,732,800,000 |
| Germany | 8,828,210,000 |
| Italy | 5,664,820,000 |
| European Investment Bank | 4,147,750,000 |
| Spain | 3,093,790,000 |
| Ireland | 656,213,000 |
| Greece | 260,869,000 |
| Portugal | 127,850,000 |
| **Brazil | 540,557,000 |
Source: Norges Bank Investment Management – May 6, 2012
Norway’s Government Pension Fund Global (GPFG) dropped a portion of its Portuguese and Irish government bonds. The sovereign fund is moving debt asset allocation into emerging markets such as Brazil, India, Mexico and parts of the Middle East. This will most likely be a gradual process. The Norwegian sovereign wealth fund was betting on European debt right after the global financial crisis. In the end of 2010, they held around €12 billion of Portuguese, Italian, Irish, Greek and Spanish government bonds. Now the fund’s fixed income holdings of these European countries is significantly lower.
Earlier in 2012, Norway’s GPFG voted against Greece’s debt swap on the premise that bondholders need to be treated equally. The sovereign fund had exchanged its Greek government bonds for new bonds issued by the Greek government and the European Financial Stability Facility (EFSF), as part of the restructuring of Greece’s debt.
“Predictability is important for a long-term investor and the euro-area faces considerable structural and monetary challenges,” Norges Bank Investment Management Chief Executive Officer Yngve Slyngstad said.
Norway’s sovereign wealth fund returned 7.1% in the first quarter.
Keywords: Norway Government Pension Fund Global.
- Asset Allocation
- eurozone debt
- Hollande
- Ireland
- Norway Government Pension Fund Global
- Policy
- portugal
- Sovereign Wealth Fund