Return of -5.3 per cent on the Petroleum Fund in the third quarter
The return on the Government Petroleum Fund in the third quarter of 2001 was -5.3 per cent measured in terms of the currency basket corresponding to the composition of the Fund’s benchmark portfolio. This is the weakest quarterly return since management of the Petroleum Fund commenced in 1996. The overall return for the first three quarters of 2001 was -6.9 per cent. Measured in NOK, the return in the third quarter was -6.3 per cent, and for the three quarters combined, -8.5 per cent.
The weak result is due to a sharp fall in international equity markets immediately after the terrorist attacks in the US on 11 September. The return on the equity portfolio in the third quarter was –18.2 per cent. Equity prices fell further during the quarter than in any other quarter since the invasion of Kuwait in 1990. There were sharp falls in all three main markets: the US, Europe and Japan.
The fixed income portfolio had an unusually high return of 3.4 per cent in the quarter. The large share of fixed income instruments in the Petroleum Fund served to dampen the effect of the price fall in equity markets on the overall return on the fund.
The return on the Petroleum Fund in the third quarter of 2001 was 0.12 percentage point lower than the return on the benchmark portfolio defined by the Ministry of Finance. Overall in the first three quarters, the Petroleum Fund underperformed the benchmark by 0.14 percentage point.
The Environmental Fund, which was established in January with a market value of NOK 1 billion, had a third quarter return of -18.9 per cent measured by the benchmark portfolio currency basket. The return since the Environmental Fund’s inception has been –27.2 per cent.
On 31 August, NOK 20 billion was transferred to the Petroleum Fund, and a further NOK 38 billion was transferred on 28 September 2001, bringing the market value of the combined portfolio to NOK 547.0 billion at the end of the third quarter.
New external equity managers
During the third quarter, agreements were entered into with four external managers for management of portfolios of small and medium-sized companies. These mandates were announced in November 2000. Agreements have been signed with Deutsche Bank Asset Management and Sparx Asset Management for mandates in Japan, with Handelsbanken for a mandate in the Nordic countries (excluding Norway) and with Merrill Lynch Investment Managers for a mandate in Europe excluding the UK and the Nordic countries.
External equity managers have also received mandates for active management of equities in specific sectors. These sectors are financials, health and pharmaceuticals, IT and telecommunications. The managers are Crédit Agricole Asset Management, Citigroup Asset Management, Franklin Advisors, Dresdner RCM and Wellington Management Company. More mandates will be allocated in the time ahead.
New mandates for management of fixed income portfolios in the Government Petroleum Fund
Norges Bank has today announced new mandates for management of fixed income portfolios in the Government Petroleum Fund. Over 20 management mandates have already been assigned to external managers, four of them fixed income managers.
The mandates that have been announced are for three main types of fixed income management.
- Active fixed income management in selected geographical regions
- Indexing with active strategies for achieving an excess return (enhanced indexing)
- Index management
The mandates will be for various regions and sectors as defined in ”Lehman Global Aggregate Bond Index”.
Clear limits to the risk that may be taken relative to defined benchmark indices will apply to all mandates. The size of the mandates will vary from USD 100 million to USD 1000 million. The deadline for applications is 15 January 2002.
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