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Norway’s Government Pension Fund Global posts 3.8% return in first quarter

Sovereign wealth fund also outlines positions on executive pay, tax practices

Norway’s Government Pension Fund Global, Oslo, returned 3.8% in the first quarter of 2017, helping to bolster assets 4.8% for the period to 7.87 trillion Norwegian kroner ($922 billion).

The return was equivalent to 298 billion kroner, said preliminary figures in a financial update Friday. For the three months ended Dec. 31, the fund returned 2.2%.

The fund’s equity investments, which make up 64.6% of total investments, returned 5.5% over the quarter. The 32.9% fixed-income allocation returned 0.8%; and the remaining investment, a 2.5% exposure to unlisted real estate, returned 0.5%.

The local currency depreciated against other main currencies over the three months ended March 31, increasing the value of the fund by 82 billion kroner. During the quarter, 23 billion kroner was withdrawn from the fund.

“Measured in Norwegian kroner, this was the third-best quarter in the history of the fund, driven by strong returns on the equity investments,” said Yngve Slyngstad, CEO of Norges Bank Investment Management, which runs the assets of the fund.

The complete quarterly report will be published April 28.

Also on Friday, the sovereign wealth fund published two further documents on its positions on CEO remuneration and tax practices. The first document said the main concern is that CEO remuneration “should be value-creating for the company and shareholders,” and said a company’s board should align CEO and shareholder interests. The board should also develop pay practices that are “simple and do not put undue strain on corporate governance, provide transparency on total remuneration to avoid unacceptable outcomes and ensure that all benefits have a clear business rationale.”

The document said fund executives will invite peer investors to consider shared principles for effective remuneration.

The second document sets out the fund’s expectations toward companies on tax and transparency, based on international principles.

These expectations aim to express how NBIM “expects multinational enterprises to exhibit appropriate, prudent and transparent tax behavior.”

Expectations are based on three main principles: that taxes should be paid where economic value is generated; that company tax arrangements are a board responsibility; and that public country-by-country reporting is a core element of transparent corporate tax disclosure.”

Documents are available on the NBIM’s website.