September 23, 2020

The Norwegians, in suspense by the fund that protects their pensions


Madrid

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Norway’s prosperity is closely tied to its powerful pension fund; Its citizens have become rich with this investment vehicle that the State created 23 years ago with the income obtained from oil. The country is the seventh largest producer of oil and third of natural gas, resources from which their governments have been able to get a lot of juice. Today, the largest sovereign wealth fund in the world, which represents three times the GDP of Noruga, extends its tentacles across the planet, making it strong to face the onslaught of the pandemic.

This economic success case reported this week that in the first semester it registered losses of 17,887 million, generating a negative return of 3.4%. However, these figures improve the losses recorded in the first quarter of the year estimated at 116,000 million euros. Norges Bank, the country’s central bank, noted that “there were large fluctuations in the stock market in this period” and added that “the year started with optimismBut the outlook soon changed when the virus began to spread around the world. ‘ In May, the Norwegian government announced that it would withdraw 38,000 million euros, 4.2% of the Fund’s resources, to face the health crisis.

But, what is special about this piggy bank that Norway has had since 1990? Are you strong enough to navigate the turbulent waters of the Covid crisis? The so-called Norwegian Pension Fund was created to avoid the “Bad Dutch”– a strong appreciation of the florin that damaged the country’s international competitiveness and impacted the economy – after the discovery at the end of the 1960s of oil and natural gas deposits. In the words of the IE University professor and director of the report Sovereign Wealth Research of the IE Center for the Governance of Change, Javier Capapé, it is “a repository of value with which to transform the profits from oil and natural gas into finite that future generations enjoy that benefit and, incidentally, reduce the tax burden. An idea that was debated for years and approved in 1990, producing the first transfer to the Fund from the Norwegian Ministry of Finance in 1996.

Present in 79 Spanish companies

Currently the Nordic sovereign wealth fund has a market value at the end of June 978,317,083.6 million euros, according to the latest official report. In other words, more than 300% of Norway’s GDP (378,930 million euros) in 2019. A heritage, in which despite its name, Norwegian pensioners do not put a penny and whose large funds are invested in 69.6% in shares (equities), 27.6% in fixed income and 2.6% in real estate assets. This particular piggy bank has investments in 9,202 companies from 74 countries, mainly in the United States and Europe.

In the case of Spain, only in equities at the end of June, it had a global investment of 13,339.6 million dollars (11,305.77 million euros) distributed in 79 companies. Some of them from the Ibex 35 like Cellnex (1.64%), BBVA (2.65%), Banco Santander (2.66%), Repsol (1.62%), Iberdrola (3.4%) or ACS (2.18%). For its part, in fixed income it had 7,942.77 million dollars (6,731.73 million euros) invested. Mainly in corporate bonds of (Telefónica, Iberdrola …) and in public debt.

Despite the losses registered, all the analysts consulted by ABC rule out that Norway should worry about the fate of its Fund. David Cano, managing partner of AFI Inversiones Globale, attributes it to the bad streak of any investor and Joaquín Robles (XTB) highlights his “Geographic diversification” and points to “the strong volatility of the stock market”, thus betting on a recovery of losses. Capapé (IE) concludes that “the Norwegian fund moves quite a lot in defined metrics and they make few risky bets.”

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