Last December we joked that the Norwegian sovereign wealth fund had responded to sinking returns and withdrawals required to fund budget deficits by allocating another $130 billion in assets to what appeared to be an already massively overpriced equity bubble in return for an extra 40bps of “expected average annual real returns” (see: Norway Buying $130 Billion In Global Equities As Sovereign Wealth Fund Continues To Bleed Cash).The extra equity purchases pushed the fund’s total equity allocation to a staggering 70% of their $860 billion in assets under management.
Alas, with global equity bubbles becoming ever more bubblier with each passing day, the bet on equities has paid off ‘bigly’ for Norway so far this year and grew their $1 trillion in AUM by another 3.2%, or a mere $32 billion, in Q3 2017 alone.
As Bloomberg notes this morning, the staggering size of Norway’s wealth fund and their seemingly reckless allocation to equities, implies they now own roughly 1% of global stocks.
Norway’s sovereign wealth fund, which owns more than 1 percent of global stocks, is treating its $300 billion bond portfolio as a hedge for what it now essentially views as a stock fund.
“60 to 70 percent in equities — imagine it was 60 to 80 or 90 percent — the whole thing is that this fund is actually to a large extent now a public equity fund,” CEO Yngve Slyngstad told reporters in Oslo. “We don’t think about this as two separate asset classes that have their distinct dynamics, the real risk of the fund is in the equity market.”
The $1 trillion Government Pension Fund Global, which started out as a pure bond portfolio before adding stocks, returned 3.2 percent in the third quarter, or 192 billion kroner ($24 billion), the Oslo-based investor said on Friday. Equities drove returns gaining 4.3 percent, while bonds rose 0.8 percent and real estate investments grew 2.7 percent.
