(Feb 28): Norway’s sovereign wealth fund is not planning to adjust its portfolio in response to a wave of global panic triggered by the spread of the coronavirus.
“We’re a fund with a 30-year horizon that takes it easy when things are turbulent,” CEO Yngve Slyngstad said in Oslo on Feb 27. “Of course, we’re still closely monitoring the market fluctuations we’re seeing, and they are considerable these days. But this is a type of risk that’s difficult for us to analyze, and therefore not typically a situation where we go in and act with regards to buying or selling stocks.” Slyngstad made the comments after the US$1.1-trillion ($1.5-trillion) investor unveiled an eye-watering US$180 billion return — its biggest ever — thanks to a rally in global stocks in 2019.
The results capped a year in which the world’s biggest wealth fund got the go-ahead to push through a spate of changes, including cutting its fossil-fuel exposure. It also started the search for a new CEO after Slyngstad made clear he wanted to step back.
For the fund, 2019 will go down in the history books as a pivotal year. Norwegians marvelled as their piggy bank hit a 10 trillion-krone milestone exactly 50 years to the day after Norway discovered the oil that would fuel the country’s vast wealth.
Slyngstad has said that reaching that milestone made him feel the time was ripe to step back, after 12 years at the helm. He will step down later this year once a successor has been found.
“Norway has gone from oil nation to oil-fund nation,” he said. Last year’s result is “without comparison the largest value increase we’ve had in a single year”.
Stocks had a formidable run in the fourth quarter as investors started to trust that global trade tensions between the US and China might be resolved. The MSCI World Index rose 25% during the year.
Since then, markets have been roiled by fears that the outbreak of the coronavirus in China will disrupt the global economy for an extended period. The week started with a violent sell-off of stocks while corporate bond markets came to a virtual standstill as issuers and investors struggled to predict the fallout of the virus.
“It’s obvious that China is the market and economy that’s been the most severely affected by the corona virus to date,” Slyngstad said in an interview. “Therefore it will be an economy that we need to follow closely and also see how it develops with regards to the companies we’re invested in there. We have around 309 billion Norwegian kroner invested in the Chinese equity markets. Of course it’s a large investment for us.”
“These types of events, pandemics or other types of events that aren’t directly caused by the way the economic machine is working, are something we are quite careful about and therefore do not like to take investment views on, or execute changes in positions in the markets,” he said.
