AMWatch

Oil fund balancing act pays off in choppy third quarter for equities

A rebalancing of Norway's sovereign wealth fund that was triggered back in the first quarter of 2021 may have helped generate a 0.1 percent return in the third quarter.

Trond Grande, deputy chief executive officer of the oil fund. | Photo: PR / NBIM

When the share of equities in the world’s largest wealth fund deviates more than 2 percentage points from its 70 percent benchmark weight, its is required to buy or sell shares to bring it back to the target allocation.

With equity markets rising in July and August before selling off in September, it may have been those sales that helped the fund outperform the market. The FTSE Global All Cap index declined 1.5 percent in the quarter.

"There is a rebalancing mechanism in the fund which says that if we go above a certain threshold in the equity allocation, we will automatically rebalance back toward the strategic target of 70 percent," Trond Grande, deputy chief executive officer of the fund, said in an interview.

"We confirm that we're in that territory, so that would be the main explanation."

The fund had 71.5 percent invested in equities at the end of the third quarter, with 25.9 percent in bonds, 2.5 percent in unlisted real estate and just 0.1 percent in unlisted renewable energy infrastructure. It owns about 1.5 percent of all listed companies.

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