Norway sovereign wealth fund taps Truston Asset to invest in stocks in Korea

Government Pension Fund Global, Oslo, with 3.7 trillion kroner ($653 billion) in assets, hired Truston Asset Management to run a $300 million Korea smidcap equity portfolio, according to a source who declined to be named.

Fund officials have been gradually increasing exposure to emerging markets to a 10% target from 6%, according to data from the sovereign wealth fund. At the end of 2011, the fund had about $5 billion invested in Korea equities.

Oystein Sjolie, spokesman for the fund, declined to provide further details about the Truston hire. “We don't comment on our external managers apart from publishing a complete list in every annual report in March,” Mr. Sjolie said in an e-mail.

Separately, the sovereign wealth fund returned 4.7% — or 162 billion Norwegian kroner — in the three months ended Sept. 30, according to a quarterly update.

The fund's total assets during the period included a separate injection of 80 billion kroner in new inflows. In comparison, the fund returned -2.2% in the previous quarter and -8.8% in the third quarter of 2011.

In the three months ended Sept. 30, equity investments rose by 6.5%, driven by a rally in global stock markets, according to Yngve Slyngstad, CEO of Norges Bank Investment Management, which manages the fund. Fixed-income assets gained 2.2%, while real estate added 2.7%.

As of Sept. 30, the fund had 60.3% of total assets invested in equities, 39.4% in fixed income and 0.3% in real estate, according to the quarterly report.

The fund's exposure to Europe was 47.8%, while investments in the Americas, Africa and Middle East totaled 37.8% as of Sept. 30. Asia and Oceania comprised 14.4% of the total portfolio. The target allocation — which is partly based on market capitalization — is to reduce exposure to Europe to 41%, and exposure to the Americas, Africa and Middle East to 40%. About 19% of the portfolio would be invested in Asia and Oceania, according to the fund's quarterly report.

The fund has already been reducing exposure to European government debt. For example, Greek government debt comprised only €68 million ($87 million) at the end of third quarter compared to an investment of €328 million a year ago. There are no investments in Portugal's and Ireland's government debt during the same period, compared to €203 million and €492 million, respectively, a year ago. Exposure to Spanish government bonds fell by a third within that period to €1.5 billion, Italian government debt decreased to €3.2 billion from €5.5 billion, according to the quarterly report.