Norwegian Oil Fund Dumps UK Gilts (Mar 2013)

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Source: The Telegraph – Norwegian oil fund dumps UK gilts

Notable excerpts:

The Norwegian oil fund, one of the world’s biggest investors, dumped almost half of its holdings in UK gilts last year amid concerns about mounting Government debt levels and money printing.

Norges Bank Investment Management, which has $713bn of assets and is the biggest sovereign wealth fund in the world, said it sold down its holding in UK debt from 110bn Kroner (£12.9bn) at the end of 2011 to just 60bn Kroner at the end of 2012.

The fund’s annual report says: “Government bond investments were weighted according to the size of a country’s economy rather than the size of its debt, reducing holdings of bonds from some of the most indebted countries.”

Yngve Slyngstad, chief executive of Norges Bank, said in an interview that the fund had made the adjustment as part of a “risk-reducing investment strategy.” He added that the dollar, yen, euro and pound sterling were all currencies with “structural issues, with regards to government debt, to private sector debt, to unconventional monetary policy, and to growth and the demographic profile of the countries.”

The Coalition has cut the UK’s deficit by a quarter but debt continues to grow. In addition, the Bank of England has pumped £375bn of money into the system through its quantitative easing programme. Last month a group of banks warned clients to steer clear of UK gilts fearing that the Bank of England had opened the door to “stagflation.”

The fund cuts its holdings in French government debt by a quarter and sold Spanish and Italian debt too but increased its investment in the US, Japan and Germany.

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