In August and into September there was a lot of talk about the Norwegian Pension Funds being too conservative leading to the announcement of a review of the monsters a couple weeks ago.From Bloomberg:
I really, really get the feeling when hearing the complaints that the critics have never run $800 billion dollars.
(duh, no one has except this fund)...
...There are a few funds, Scottish Widows being another, that you just expect to be conservative, and as far as I can tell the Viking loot is in good hands with one of our favorite economists, Elroy Dimson of the LBS and Cambridge, advising the funds as Chairman of the Strategy Council.
World’s Biggest Wealth Fund Told Return Target Raising Risk
Norway’s $800 billion oil fund is under pressure to show it can handle the risks associated with emerging markets as the world’s biggest sovereign wealth investor looks for ways to boost returns.
The government-appointed Strategy Council yesterday cautioned against underestimating the risk of expanding into emerging markets. The comments come amid concern that unprecedented stimulus from central banks in the biggest economies has skewed asset prices as investors chase yield in riskier markets.
“There’s no doubt that if you put your money into a typical emerging markets portfolio, you are exposed to more irresponsible companies,” Elroy Dimson, a professor emeritus at the London Business School and an adviser to Norway’s Finance Ministry on investment strategy, said in an interview.
The oil fund, which posted its second-best year in 2012, is undergoing a shift in strategy to capture more global growth. That’s involved moving investments away from Europe as emerging markets in Asia and South America make up a bigger share of the world economy. The fund has weighted its bond portfolio according to gross domestic product, after shifting away from a market weighting to avoid nations with growing debt burdens.
The decision brings with it greater responsibility to ensure investments don’t backfire, according to Dimson.
No Guarantee
“There’s no guarantee you get it right, so you need to be among the better transactors of that asset class,” he said.
The fund has already felt the sting of buying riskier assets. It lost 5.9 percent on its stock investments in emerging markets in the second quarter. The fund rose 0.1 percent in that period, helped by U.S. and Japanese stocks. It rallied 5 percent in the third quarter....MORE
