OSLO Norway's $300 billion (£201.12 billion) sovereign wealth fund will remain a big buyer of equities after raising its holdings to 1.25 percent of European stocks and about half that proportion in markets elsewhere, its chief said.
Commonly known as "the oil fund", the Government Pension Fund -- Global invests Norway's oil and gas wealth in foreign stocks and bonds for when the "black gold" runs out. It held 0.77 percent of Europe's stocks at the end of 2007.
Executive director Yngve Slyngstad said in a briefing for foreign correspondents on Thursday that the current market weakness was an opportunity for the fund, which is boosting its equity allocation to 60 percent of total assets from 40 percent.
"We are slightly above 50 percent (in equities), so we will continue to be large buyers over the nearest months," Slyngstad said. "We have had a massive increase in our ownership stakes this year."
"These market circumstances suit us very well, we are a large buyer in a market with more sellers than buyers," he said.
Slyngstad said the fund was raising its equities allocation by investing much of its inflows -- which have totalled some 400 billion Norwegian crowns over the past 12 months -- in stocks rather than by selling heavily out of bonds.
"We have had a stabilising effect (on the markets) to the extent that at least there's one buyer out there," he said.
Despite the huge inflows this year, generated by record high oil prices, the fund's overall value has stayed nearly unchanged at around 2 trillion crowns due to weak global markets. A weaker crown has supported its value in local currency in past months.
The fund has been given permission by the finance ministry to put up to 5 percent of its assets into real estate, and Slyngstad said it would begin investing in property next year.
"We basically have $20 billion sitting on the sidelines to invest in the international real estate market," Slyngstad said, adding however that it was not certain if the fund would start investing in property in the first or second half of 2009.
The fund has taken part in six financial sector recapitalisation schemes this year, four in the second quarter and two in the third quarter, spending around $1 billion which he said was less could be assumed based on its size.
"We are still cautious about this market, we are long-term but also cautious investors," he said when asked why the fund's participation had been lower than its weight as an owner.
He declined to name the financial institutions whose recapitalisation issues the fund had supported and he said the fund remains slightly underweight in financial stocks.
He said the fund, which this year has also been granted leeway to take up to 10 percent stakes in single companies from an earlier of 5 percent, has built stakes of "slightly" more than 5 percent in some companies, but he did not name them.
The fund has also been given permission to invest in commodities, but Slyngstad said the fund has not done that yet and has no plans to start doing so in 2009.
(Reporting by John Acher and Wojciech Moskwa)