October 25, 2013 / 9:53 AM / 6 years ago

Norway's $810 billion oil fund hikes holdings in emerging markets

OSLO (Reuters) - Norway’s sovereign wealth fund, one of the world’s biggest investors, bought more government bonds issued by booming emerging economies Mexico, Brazil and South Korea in the third quarter but dumped French and Canadian debt.

The $810 billion oil fund, in which Norway saves revenues from its main export for the future, is the largest sovereign wealth fund in the world.

It returned 5.0 percent on its portfolio in the third quarter of 2013, beating its own benchmark index by 0.1 percentage point. That put July-to-September among the 10 best performing quarters for the fund, its chief executive said.

“Stock market returns in the third quarter were driven mainly by continued economic recovery in developed markets,” Yngve Slyngstad said in a statement on Friday.

“But higher economic activity in China led a rebound towards the end of the period. Fixed income investments continued to perform relatively poorly.”

The fund, worth some $160,000 for each of Norway’s 5.1 million residents, holds about 1 percent of all global equities.

Among the biggest changes in its portfolio was a 28 percent increase in its holdings of Mexican government bonds.

The fund also increased its purchases of Brazilian and South Korean bonds, which are now its ninth and 10th biggest debt holdings respectively.

The fund dumped French and Canadian government bonds, with both countries falling out of its top 10 holdings. In the second quarter, French bonds were in fifth place while Canadian bonds were 10th.

In the second quarter, it had dropped British government bonds in favour of Japanese paper and increased the share taken by equities in its investment portfolio.

The fund has a long-term aim of increasing its investments in emerging economies to reflect the fact that economic growth is more likely to happen there than in mature economic regions such as Europe and North America.

The fund publishes the list of its top 10 government bond holdings only.

The fund slightly increased the share of equity holdings to 63.6 percent of its portfolio from 63.4 percent three months ago and trimmed its ownership of government bonds to 35.5 percent from 35.7 percent.

The fund’s investments totalled 4.8 trillion Norwegian crowns or $810 billion on Friday.

Nestle NESN.VX remained the fund’s biggest equity holding with a stake worth 38.3 billion crowns. Royal Dutch Shell (RDSa.L) stayed in second place too with 28.4 billion.

Real estate investments, which accounted for 0.1 percent of the fund’s holdings, returned 4.1 percent in the quarter.

The Norwegian government expects the fund’s investments to reach $1.1 trillion by 2020.

Writing by Gwladys Fouche; Editing by Catherine Evans

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