Government Pension Fund Global, Oslo, warned that stock market gains might reverse as Europe's biggest equity investor said it won't use new inflows to buy more shares.
“Our share in the stock market has been stable or falling even though markets are rising, and that means in practice that we're not using inflows to buy stocks,” Yngve Slyngstad, CEO of Norges Bank Investment Management, said at a news conference Friday in Oslo.
The fund is preparing for a “correction” in stock prices, he said. NBIM manages the fund's investments.
The warning follows a surge in stock values that added 7.6% to the fund's equity portfolio last quarter.
On Friday the fund reported assets of 4.714 trillion kroner ($798.4 billion) following investment returns of 5% in the quarter ended Sept. 30, representing a 228 billion kroner gain. The return beat the benchmark set by the Finance Ministry by 0.1 percentage point.
Bond investments climbed 0.3% and real estate holdings returned 4.1%.
Stocks rallied in the third quarter as the U.S. Federal Reserve unexpectedly refrained from ending its $85 billion-a-month quantitative easing program last month. Growth forecasts for China, the world's second-biggest economy, also improved, propelling equities globally. The MSCI World index of stocks gained 7.7% in the quarter, paring some gains late last month as concern grew over a U.S. government shutdown.
The sovereign wealth fund held 63.6% in stocks at the end of September, up from 63.4% in the second quarter. Bond holdings slid to 35.5% from 35.7% while real estate accounted for 0.9%.
Norway generates money for the fund from taxes on oil and gas, ownership of petroleum fields and dividends from its 67% stake in Statoil ASA, the country's largest energy company. Norway is Western Europe's largest oil and gas producer.
The government deposited 58 billion kroner of petroleum revenue into the fund in the quarter.