There is only one catch, says CEO Olaug Svarva National Insurance Fund.
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Government Pension Fund Norway, known as the National Insurance Fund, could slam the table with an increase of 11.5 billion between April and June this year.
Record
A strong stock market where the Fund’s principal investment group rose 33 percent in the period, contributed to one of the best quarters in the Fund’s history.
The Good share climate has led the main index up ten percent so far this year. Still monitors the Oslo Stock Exchange over 600 points, and within easy reach of the closing price record set in late June at 631.15 points.
– Not expensive
Entry level Olaug Svarva National Insurance Fund as a result of recovery eased close to four billion from equities to fixed income securities. The coming of the fund rebalancing rule that says that 60 percent percent of the fund’s investments will be in equities and 40 percent fixed income.
Svarva believes that the stock market is still “not expensive”, referring to the companies on Oslo stock average is priced at 12 times expected earnings (P / E), and 1.75 times book value.
The question is whether companies will be able to meet an expected earnings growth over ten percent, according to her.
– It is fair priced given that earnings are going. Market expectations for earnings are over double digits, says Svarva a presentation Tuesday.
– Fragile recovery
While rebalancing rule, which forces the fund to act counter-cyclically, have outperformed 14 billion since it was introduced in 2007, the willingness to take risk at the market increased significantly, according to the CEO.
- National Insurance Fund manages the Government Pension Fund Norway and perform other administrative Ministry of Finance
- As of the first half of 2014 was 183, 5 billion under management, up from 167.8 billion at the end of last year.
- The fund invests in equities (60 percent) and government and corporate bonds (40 percent) in the Nordic region with emphasis on Norway
On the other hand, the more uncertain times of geopolitical turmoil in Iraq and Ukraine, and trade sanctions from Western powers and Russia, threatening a “fragile” recovery in the world economy, she points out.
– It is clearly negative. But often it does not take long before geopolitical events and the kind of turmoil subsides. The question is how it here affect corporate earnings, says Svarva.
Turns benchmark
The equity portfolio amounted to 62.3 percent of the fund’s investments second half. Despite an increased weighting towards fixed income securities, the risk is however unchanged, says head of Equities Nils Bastiansen informs DN.
The management of the Fund generated a total return of 6.7 percent, of which 9.1 per cent for equities and 2, 7 percent of the portfolio in the second quarter. It provides a blueprint of 12.2 and 4.5 percent respectively for equity and fixed income investments as of the first half.
There are approximately 0.2 and 0.45 percent better than the respective benchmark indexes to fund compares with.
Taking down the interest rate risk
In the last five years, the National Insurance Fund had an annualized return of 13.21 percent, of which 16.75 percent of the Stocks and 6.98 percent fixed income securities.
Fixed-return during the period has been very good, and without much risk, according Svarva. These attributes she greatly investments made in 2010 when the risk premium in the market was low. However, this has turned.
The risk willingness in interest rates have increased to an even greater extent than in the stock market, and with it also the risk premium, points Svarva. Thus, it has taken the risk of the bond portfolio by rebalancing, lower credit interest and lower credit term, said she.
– Within renteporteføjen we expect a lower return than we had, says the National Insurance Fund boss.
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