Norway's Government Pension Fund Global, Oslo, slashed the amount of assets managed by its external manager pool by about half in 2011, the fund announced Friday.
External managers invested a combined $25 billion, just 4.4% of the 3.3 billion trillion Norwegian kroner ($570 billion) fund's total assets as of Dec. 31. That's down from a 9.2% share, or about $48 billion, the previous year.
“The share of externally managed assets is expected to remain low in the future,” according to the fund's 2011 annual report, released Friday.
The fund's external managers currently invest almost exclusively in small-cap developed markets and smidcap emerging markets equities. Environmental mandates is a third area that may attract future mandates.
“In most of these cases, there is less opportunity for larger mandate sizes,” Dag Dyrdal, global head of external relations at Norges Bank Investment Management, said in an interview. NBIM manages the fund's assets in accordance to guidelines set by the Norwegian Ministry of Finance.
The fund uses just one external fixed-income manager, BlackRock, to run about $500 million in U.S. mortgage-backed securities, according to the report. That mandate is still in place primarily to allow the underlying securities to regain their value after significant declines in 2008, Mr. Dyrdal said.
“There are no plans to add new mandates in fixed income over the short term,” Mr. Dyrdal said.
Although the amount of assets managed fell, the number of external managers held firm at 45 in 2011.
The fund's total assets rose by 234 billion kroner in 2011, as the largest capital inflows since 2008 were greater than investment losses.
The fund returned -2.5% on investments in 2011, a loss of 86 billion kroner. Equities fell 8.8%, while bonds rose 7%. The fund underperformed its custom benchmark by 13 basis points.
The asset allocation as of Dec. 31 was equity 58.7%, fixed income 41% and real estate 0.3%.
