Government Fund Weekly News Roundup — China Market Turmoil Rocks Norway’s SWF

October 30, 2015 by Loch Adamson

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Yngve Slyngstad

NBIM CEO Yngve Slyngstad


Norway’s giant sovereign wealth fund lost $32 billion in the third quarter of 2015 due to a slump in the value of its stock holdings. Azerbaijan and Russia dip into their savings funds. QIA backs a new commodities buyout firm.

Norway’s Heavy Losses

Stock-market volatility wreaked havoc on Norway’s sovereign wealth fund, the Government Pension Fund Global, in mid-2015. According to the latest performance report from Norges Bank Investment Management (NBIM), the arm of the central bank that manages the fund, the value of GPFG’s investments fell by 4.9 percent over the three months through September 30 — that’s a decline of approximately 243 billion kroner ($32 billion).

In a statement, NBIM CEO Yngve Slyngstad ascribed the losses to "the decline in global equities markets, especially the Chinese market." NBIM has increased its exposure to Chinese shares over the past two years and now invests approximately 2.8 percent of the fund’s equities portfolio in the Asian power. GPFG’s Chinese stocks lost 21.3 percent of their value over the quarter.

The fund’s China woes were compounded by plunging share prices in two European firms in which it owns multibillion-dollar stakes: Swiss conglomerate Glencore, which is struggling amid falling commodities prices, and German car maker Volkswagen, which is at the center of a scandal focused on emissions-testing falsification in the U.S. GPFG's overall assets stood at 7 trillion kroner ($822.9 billion) as of September 30.


Oil Slump Hurts Azerbaijan, Russia

For now, Norway has resisted the urge to dip into GPFG for capital to support budgetary spending, despite a slump in government oil revenue (although the situation may change in 2016). Elsewhere, though, savings funds are propping up cash-strapped governments. 

Take the State Oil Fund of the Republic of Azerbaijan (SOFAZ). The fund’s assets under management dropped from $37.1 billion to $34.7 billion over the first nine months of 2015. SOFAZ received $5.2 billion in revenue from oil and gas sales over that period — and transferred $5.4 billion to the state coffers. The fund also paid out approximately $700 million to finance ongoing infrastructure projects and other government spending initiatives.

Azerbaijan’s neighbor Russia is on the brink of exhausting its National Reserve Fund, a stabilization vehicle. Minister of Finance Anton Siluanov has confirmed the government will withdraw 2.5 trillion rubles ($37.9 billion) from the fund — approximately half its total assets — before the end of the year. He’s warned that further withdrawals in 2016 could deplete the fund entirely. Russia's economy has been hit hard by Western sanctions and the slump in global oil prices over the past 12 months. 

QIA Backs $1.7 Billion Commodity Buyout Firm

While the collapse in oil prices is causing headaches for many government institutions, it’s also creating investment opportunities.

This week the Qatar Investment Authority (QIA) agreed to invest in London-based Global Natural Resource Investments (GNRI), a new $1.7 billion commodities-focused private equity firm. GNRI is led by Mark Brown, a former executive at U.K. financial services firm Barclays, who led a management buyout of Barclays' natural resources unit to create the new, independent company. Barclays will retain a stake in GNRI, which is hoping to capitalize on a wave of private equity deals sweeping the oil and gas sector as global energy giants seek to offload assets to bolster their balance sheets.



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