Norway's Government Pension Fund-Global, Oslo, has stocked up on Greek debt, as well as bonds of Spain, Italy and Portugal.
Finance Minister Sigbjorn Johnsen says he backs the strategy, which contributed to a 3.4% loss on European fixed income in the second quarter, compared with gains on bonds in Asia and the Americas.
Norway says its long-term perspective will protect it from losses. “One could say we are investing for infinity,” Mr. Johnsen said in an interview last month. “It is important when you look at the time scope of the fund and the investments that there should be a portion of active management.”
The 2.79 trillion Norwegian kroner ($451 billion) fund, which manages Norway's oil and gas wealth, mostly buys securities in proportion to their importance in global indexes. By using its leeway to stray from those benchmarks, the fund has beaten those measures by an annual average of 0.3% since 1998.
Yields on Greek 10-year debt are more than 9.5 percentage points higher than on German bonds, up from a premium of 1.15 points a year ago.
Norway's bet on Greece is too risky for many, including PIMCO, which runs the world's biggest fixed-income fund. “I see it as being quite a substantial risk that Greece eventually defaults or restructures,” said Andrew Bosomworth, PIMCO's Munich-based head of portfolio management.