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[la forge] 28/2/2019 16:37

Feb 28, 2019, 09:03am
Norway Makes Multibillion-dollar Bet On Britain's Economy, And You Should Follow Suit
Simon Constable
Simon Constable
Contributor
Investing
Author | Broadcaster | Journalist | Commentator | Speaker.

Pro-EU supporters protest outside the Houses of Parliament in London. (Photo by WIktor Szymanowicz/NurPhoto via Getty Images)Getty

Norway has placed a bet on Britain totaling tens of billions of dollars, even though no Brexit deal has been signed with the European Union.

Savvy investors should follow suit by investing in British stocks such as those in the FTSE 100 index, which tracks the largest public companies in the UK.

How much did Norway bet? It's sovereign wealth fund, which is the largest of its type in the world, invested 8.5% of its total assets in the UK, or around $84 billion, according to press reports. Read more here also.

In other words, the fund has taken approximately one-in-12 of its dollars, which they could have invested anywhere in the world, and bet them on Britain.

It's done so even before Britain's Prime Minister Theresa May has secured a deal with the EU that would allow unfettered trade when the UK leaves the bloc on its scheduled exit date of March 29.

Better still, the fund says it's in for the long haul, meaning the next three decades.

Apparently, the oil-rich Scandinavians in Norway know something that other investors don't. The FTSE 100 has languished over the past two years, retreating 4% through Wednesday excluding dividends, according to data from Yahoo! Finance. That compares with gains of almost 18% for the S&P 500 over the same period, again excluding dividends.

The reason for the recent British market underperformance has clearly been jitters over whether the UK can secure that much-desired trade deal.

However, it should be clear what the Norwegians see in Britain and that's why individual investors might want to follow suit.
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The dividend yield on Britain's stocks is huge, especially when compared to the U.S. market. The FTSE 100 yields more than 4% a year versus a hair under 2% for the S&P 500 index which tracks U.S.-based large capitalization stocks. Some British stocks yield far higher dividends than the average such as oil company BP which is expected to produce dividends of 5.8% this year.
The market in the UK is relatively cheap. The MSCI UK market index, which tracks a basket of UK stocks, trades at a forward price earnings multiple of 12.4 versus a forward multiple of 16.5 for the U.S. market, according to calculations by Yardeni Research.
The big companies in the UK stock market aren't totally dependent on how the UK economy performs. For instance, Royal Dutch Shell, another oil company, is a global firm that operates in many countries. In that way, it is similar to many U.S. companies in the S&P 500 which get close to half their sales outside the U.S., on average.
The British economy is performing significantly better than are other EU countries. Unemployment is at multi-decade lows and would-be migrants are choosing the UK over France despite the latter's generally better weather. British unemployment now stands at 4% which is less than half the 8.8% unemployment rate across the channel in France, according to data from data website Trading Economics.
Britain's labor laws are far more flexible than those in mainland Europe, and that's why companies often prefer doing business in the U.K. versus the continent. The difference between those laws and associated regulations will likely get wider and in Britain's favor once the UK leaves the EU, which is currently scheduled for March 29.

For all those reasons, savvy investors might try placing a similar bet on Britain by purchasing UK stocks, such as those held in the Franklin FTSE United Kingdom exchange-traded fund.



Simon Constable is a writer, economics commentator, and a fellow at The Johns Hopkins Institute for Applied Economics, Global Health and the Study of Business Enterprise.
Simon Constable
Simon Constable
Contributor

[la forge] 04/10/2018 11:49

World’s biggest wealth fund beefs up case for dumping oil stocks

Written by Bloomberg - 04/10/2018 11:14 am

The Scarabeo 8 deepwater oil drilling rig, operated by ENI Norge AS, stands illuminated at night after being re-fitted at the Westcon AS yard in Olensvag, Norway, on Tuesday, April 3, 2012. Photographer: Kristian Helgesen/Bloomberg
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Norway’s $1 trillion sovereign wealth fund is building its case for divesting its massive holdings of oil and gas stocks.

In a presentation last month to key lawmakers obtained by Bloomberg, its chief executive officer, Yngve Slyngstad, said that the fund would have made 308 billion kroner ($38 billion) more over the past decade had it not been invested in oil and gas stocks.

The number crunching expands the fund’s reasoning after it last year stunned markets by announcing it wanted to sell out of oil and gas to reduce Norway’s overall exposure to petroleum. The previously unpublished figures were presented as debate swirls in Norway over what to with the fund’s holding of about $40 billion in oil and gas stocks.

Parliament is leaning toward approving the plan, but the two largest government parties have so far kept a lid on how they may vote. An expert commission in August recommended against the proposal, arguing that a divestment from petroleum stocks would only marginally limit the effect of lower crude prices on the wealth of Norway, which is western Europe’s biggest oil and gas producer.
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Read more: Commission recommends against oil fund plan

The fund’s figures showed that the investor would have boosted returns by divesting oil stocks before the collapse of crude prices in 2014 and re-investing the proceeds in the rest of the fund’s reference index. A sale in 2013 would have yielded 136 billion kroner extra, and even a divestment in 2015 would have made the fund an additional 9 billion kroner.

Officials at Norges Bank Investment Management, the central bank unit which manages the fund, declined to comment. The fund and the central bank haven’t directly addressed the counter-arguments in the report by the expert panel so far, saying only that they maintained their proposal.

The fund’s proposal roiled markets in November last year, sending oil stocks lower. The bank insisted the plan is based purely on financial considerations, aiming to reduce Norway’s risk exposure, and doesn’t reflect a particular outlook for oil prices.

Knut Anton Mork, a Norwegian economics professor who also led a committee in 2016 on expanding the fund’s equity portfolio, bristled at the new arguments being presented by NBIM and warned it could backfire and irritate bureaucrats at the Finance Ministry.

Mork said he supports the fund’s initial argument that selling out of oil stocks would reduce Norway’s overall risk, but that it’s now being “populist̶1; in its advocacy.

“What it’s about is that the Norwegian state is in reality a gigantic oil company and that it therefore makes no sense that it would also invest in other oil companies,” he said. “That creates a concentration risk. And that’s actually all you need to say.”

The presentation at NBIM’s office in New York on the morning of Sept. 21 was one of several events attended by members of parliament’s Finance Committee during a visit in the city that week.

Svein Roald Hansen, a lawmaker for the opposition Labor Party who was present, said Slyngstad didn’t present the figures as a direct argument in favor of the fund’s proposal or against the panel led by economics professor Oystein Thogersen. But the findings were “useful information,” he said.

“When we get to the point where we consider the proposal, there will also be the question of what the downside is — what do we risk losing,” Hansen said in a phone interview. “At least, it alleviates the concerns over doing this.”

Labor, the biggest party in parliament, has voiced cautious support for the plan, but will make a final decision once the Conservative-led government has presented its view next spring. The Finance Ministry had previously expected to do so this year, but postponed the date to make time for a public consultation on the Thogersen report. The central bank is among those that have been asked to give its opinion.

“I don’t wish to speculate or make any political interpretation on the content in such presentations,”; Mudassar Kapur, a Conservative member of the Finance Committee, who also attended the presentation, said in an email. “We’re waiting for the Finance Ministry to present its assessments.”

[ariane] 21/8/2018 19:46

The world’s largest sovereign wealth fund just missed its own target

The Government Pension Fund Global returned 1.8 percent in the second quarter.
The fund's benchmark target , set by the government, is 2 percent.
Norway is home to the world's largest sovereign wealth fund.

David Reid | @cnbcdavy
Published 4 Hours Ago CNBC.com









A Norwegian flag flies from a boat near the assembly site of offshore floating wind turbines.
Carina Johansen | Bloomberg | Getty Images
A Norwegian flag flies from a boat near the assembly site of offshore floating wind turbines.

Norway's $1 trillion sovereign wealth fund has missed its target returns in the second quarter after its investments failed to fire.

Norges Bank, which manages the Government Pension Fund Global, said Tuesday that it had returned 1.8 percent, or 167 billion kroner ($19.8 billion), in the second quarter of 2018.

The return on the fund was 0.2 percentage points lower than the benchmark index set by the country's ministry of finance.

Stock investments generated 2.7 percent in returns, unlisted real estate investments brought in a 1.9 percent gain, but fixed-income investments returned nothing at all.

In stocks, Amazon made the biggest contribution to equity returns, followed by Apple and Royal Dutch Shell.

"North American and European stocks had a positive development in the quarter despite the prospect of increased trade barriers. This made a positive contribution to the fund's return," said Trond Grande, deputy CEO of Norges Bank Investment Management.

In the bond market, European government bond holdings generated a 2.2 percent loss, adding to a 1 percent loss from Japanese bonds. Those losses were largely offset by a 3.1 percent gain from U.S. Treasurys.

Norges Bank reported that the fund had a total market value of 8,337 billion kroner ($988.4 billion) as of June 30 and its investment split worked out at 66.8 percent in equities, 2.6 percent in unlisted real estate and 30.6 percent in fixed income.
David ReidDigital Correspondent, CNBC.com

[grupo] 03/6/2018 21:39

Norway’s Wealth Fund One Step Closer To Ditching Oil
By Tsvetana Paraskova - May 23, 2018, 3:00 PM CDT Wealth fund Norway

The world’s biggest sovereign wealth fund, Norway’s US$1-trillion Government Pension Fund Global, has won support from top Norwegian economists and academics for its plan to dump oil and gas stocks.

This non-binding support from Norway’s top universities is part of the process of hearings and consultations on the proposal to divest from oil and gas stocks. It moves the fund closer to possibly implementing its plan. The Norwegian government aims to reach a final decision on the proposal in the fall of 2018.

The Norwegian fund, created in 1990 to manage the country’s huge oil revenues and support the government’s long-term management of petroleum proceeds, hit the US$1-trillion value threshold last year.

At the end of last year, the fund recommended the removal of oil and gas stocks—more than US$35 billion worth of shares—from the fund’s equity benchmark index to make Norway’s wealth and economy less vulnerable to a permanent drop in oil and gas prices. The oil and gas sector accounts for about 4 percent of the fund’s investment in equities.

Although the fund’s recommendation to exit oil stocks is based entirely on financial risk assessment, the world’s biggest sovereign wealth fund dumping oil and gas investments could have a ripple effect on other large institutional investors at a time in which investors have yet to show renewed confidence in energy stocks and in which some shareholders and investors are calling upon Big Oil to start taking climate change seriously and step up efforts to fight it.
Related: $80 Oil Could Kill Smaller Airlines

The Norwegian fund is invested in more than 9,000 companies worldwide and owns 1.4 percent of listed companies around the world and 2.4 percent of all listed companies in Europe. As at December 31, 2017, the fund held stakes in 350 oil and gas stocks around the world, including just over 2 percent in each of Shell and BP, 1.9 percent in Total, 1.4 percent in Eni, 0.9 percent in Exxon worth more than US$3 billion, and just below 1 percent in Chevron worth US$2.24 billion.

As part of the hearing process for the fund’s plan to dump oil stocks, academics from the Norwegian University of Science and Technology (NTNU), the University of Oslo (UiO), and the Norwegian School of Economics (NHH), have supported the proposal in recent consultation letters, arguing that it would diversify risks.

Professors Gernot Doppelhofer, Torfinn Harding, Klaus Mohn, and Krisztina Molnar from NHH support the recommendation, saying that “Given a high exposure to oil and gas in the state’s portfolio outside the oil fund, intuition about diversification suggests that the oil fund should not take on direct oil and gas risk.”
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Knut Anton Mork, a professor at NTNU, also supports the plan and says that the arguments for removing oil and gas stocks are “very convincing.”

“The advice given by Norges Bank has a solid scientific basis, and has broad support in both national and international academic communities,” professors at the UiO wrote in their letter, as carried in English by Bloomberg.

The University of Stavanger Business School said that the hearing and plan is “highly relevant and timely” but stopped short of backing the proposal.
Related: EVs Could Erase 7 Million Bpd In Demand

The Oslo-based Norwegian Business School, however, says that the question whether to dump oil stocks “doesn’t have as clear an answer.”

“A question of this importance requires comprehensive analyses before the final decision is made,” professors Espen Moen and Richard Priestley and associate professor Espen Henriksen, a former employee at the fund, said.

The academics’ opinions are not expected to weigh in the final decision as much as that of an expert group that the government has appointed to assess and review energy stocks in the fund’s portfolio. The expert group should present its findings in a report by August 24, 2018.

Regardless of Norway’s decision on this proposal, the fact that the sovereign wealth fund created by the nation’s oil riches now wants out of oil stocks speaks volumes about the new investment world for oil and gas companies.

By Tsvetana Paraskova for Oilprice.com

[ariane] 23/5/2018 21:48

Norway’s Wealth Fund One Step Closer To Ditching Oil
By Tsvetana Paraskova - May 23, 2018, 3:00 PM CDT Wealth fund Norway

The world’s biggest sovereign wealth fund, Norway’s US$1-trillion Government Pension Fund Global, has won support from top Norwegian economists and academics for its plan to dump oil and gas stocks.

This non-binding support from Norway’s top universities is part of the process of hearings and consultations on the proposal to divest from oil and gas stocks. It moves the fund closer to possibly implementing its plan. The Norwegian government aims to reach a final decision on the proposal in the fall of 2018.

The Norwegian fund, created in 1990 to manage the country’s huge oil revenues and support the government’s long-term management of petroleum proceeds, hit the US$1-trillion value threshold last year.

At the end of last year, the fund recommended the removal of oil and gas stocks—more than US$35 billion worth of shares—from the fund’s equity benchmark index to make Norway’s wealth and economy less vulnerable to a permanent drop in oil and gas prices. The oil and gas sector accounts for about 4 percent of the fund’s investment in equities.

Although the fund’s recommendation to exit oil stocks is based entirely on financial risk assessment, the world’s biggest sovereign wealth fund dumping oil and gas investments could have a ripple effect on other large institutional investors at a time in which investors have yet to show renewed confidence in energy stocks and in which some shareholders and investors are calling upon Big Oil to start taking climate change seriously and step up efforts to fight it.
Related: $80 Oil Could Kill Smaller Airlines

The Norwegian fund is invested in more than 9,000 companies worldwide and owns 1.4 percent of listed companies around the world and 2.4 percent of all listed companies in Europe. As at December 31, 2017, the fund held stakes in 350 oil and gas stocks around the world, including just over 2 percent in each of Shell and BP, 1.9 percent in Total, 1.4 percent in Eni, 0.9 percent in Exxon worth more than US$3 billion, and just below 1 percent in Chevron worth US$2.24 billion.

As part of the hearing process for the fund’s plan to dump oil stocks, academics from the Norwegian University of Science and Technology (NTNU), the University of Oslo (UiO), and the Norwegian School of Economics (NHH), have supported the proposal in recent consultation letters, arguing that it would diversify risks.

Professors Gernot Doppelhofer, Torfinn Harding, Klaus Mohn, and Krisztina Molnar from NHH support the recommendation, saying that “Given a high exposure to oil and gas in the state’s portfolio outside the oil fund, intuition about diversification suggests that the oil fund should not take on direct oil and gas risk.”
Oilprice.com
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Join the world’s largest community dedicated entirely to energy professionals
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Knut Anton Mork, a professor at NTNU, also supports the plan and says that the arguments for removing oil and gas stocks are “very convincing.”

“The advice given by Norges Bank has a solid scientific basis, and has broad support in both national and international academic communities,” professors at the UiO wrote in their letter, as carried in English by Bloomberg.

The University of Stavanger Business School said that the hearing and plan is “highly relevant and timely” but stopped short of backing the proposal.
Related: EVs Could Erase 7 Million Bpd In Demand

The Oslo-based Norwegian Business School, however, says that the question whether to dump oil stocks “doesn’t have as clear an answer.”

“A question of this importance requires comprehensive analyses before the final decision is made,” professors Espen Moen and Richard Priestley and associate professor Espen Henriksen, a former employee at the fund, said.

The academics’ opinions are not expected to weigh in the final decision as much as that of an expert group that the government has appointed to assess and review energy stocks in the fund’s portfolio. The expert group should present its findings in a report by August 24, 2018.

Regardless of Norway’s decision on this proposal, the fact that the sovereign wealth fund created by the nation’s oil riches now wants out of oil stocks speaks volumes about the new investment world for oil and gas companies.

By Tsvetana Paraskova for Oilprice.com

[sarkasm] 02/5/2018 13:13

Norway Stops Making Withdrawals From Its $1 Trillion Wealth Fund
By Sveinung Sleire
2 mai 2018 à 10:34 UTC+2

Norway has stopped dipping into its $1 trillion wealth fund after fending off the biggest downturn for its oil industry in a generation.

Data show that the government for the first time since it started withdrawals from its massive piggy bank in 2016, refrained from taking out any cash in both February and March. Just as recently as October, the government had estimated it would need to withdraw 72 billion kroner ($9 billion) this year to cover budget holes.

Read More: Oil Spending is Hard to Kick

Withdrawals have come to a quick halt as the price of oil has risen more than anticipated and as Prime Minister Erna Solberg prepares to temper a record spending spree over the past four years. It will be a relief to the fund, which has struggled to keep up returns amid record low interest rates, giving it more money as it expands its holdings of stocks and wider freedom to snap up more real estate.
An Era of Withdrawals Ends

Norway stops withdrawals from its sovereign wealth fund

Source: Norwegian Government Agency for Financial Management

In its budget for this year, released in October, the government anticipated the price of Brent crude would average $55 per barrel this year, far below the current level of $73. Unemployment in Norway has also subsided quickly from a peak in 2016. It’s now below 4 percent again, boosting tax revenue and damping the need to spend.

The government will release its revised budget for this year on May 15.

The wealth fund’s chief executive officer, Yngve Slyngstad, last week flagged that the withdrawals were coming to an end. With a recovery in oil prices and rising petroleum income for the government, it’s “obviously possible” that 2018 could be the first year since 2015 to yield a net deposit of cash into the fund, he said.

The fund has been able to handle withdrawals with few problems over the past years, using its roughly 200 billion kroner a year in income from dividends, bond interest payments and rent on real estate.