Stock slump weighs on third-quarter results
The Government Pension Fund Global returned -8.8 percent, or -284 billion kroner, in the third quarter of 2011 as global stock markets tumbled.
“Europe's debt crisis and fears of a global economic slowdown weighed on stocks in the quarter,” says Yngve Slyngstad, chief executive officer of Norges Bank Investment Management (NBIM), which manages the fund. “Most of the fund’s new capital was placed into equities to exploit the declines and take advantage of our long-term perspective.”
Equity investments returned -16.9 percent and fixed-income holdings gained 3.7 percent. The overall return, the second weakest in the fund’s history, was 0.3 percentage point lower than the return on the benchmark indices.
The fund’s worst-performing stock investment, in nominal terms, was BNP Paribas, followed by Siemens and Daimler. The best performers were Apple, Vodafone and IBM. Government bonds led gains in the fund’s fixed-income investments, returning 7 percent, as demand increased for debt issued by countries such as Germany, France, the UK and the US.
The fund bought a 50 percent stake in seven properties in and around Paris from AXA Group in July for 702.5 million euros, or about 5.5 billion kroner. It was the fund’s first real estate investment in France and its second overall. At the end of the quarter, the fund held 55.6 percent equities, 44.1 percent fixed income and 0.3 percent real estate.
The fund’s market value fell 56 billion kroner to 3,055 billion kroner in the quarter. The fund returned -284 billion kroner in the period, while capital inflows from the government were 78 billion kroner. A weakening of the krone against several major currencies increased the market value by 150 billion kroner.
In the first nine months of 2011 the fund returned -6.6 percent, or -222 billion kroner. Equity investments returned -15.1 percent and fixed-income holdings gained 6.3 percent. The overall return was 0.2 percentage point lower than the return on the benchmark indices.
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