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Norway wealth fund to up Africa exposure

SA fixed-income exposure $170m; Nigeria a likely candidate.

JOHANNESBURG – Norway’s $680 billion sovereign wealth fund is looking at Africa with interest as it seeks to take advantage of the region’s rapid growth and diversify its portfolio, a senior official said on Wednesday.

The world’s largest sovereign fund has investments in Egypt, South Africa and Morocco but sees opportunities in other African countries, though their capital markets are still developing, Deputy Chief Executive Trond Grande told Reuters.

“Other African nations are improving their capital markets. You see that growth is high there,” Grande said. “They are of interest for this fund as well, as we’re trying to be as globally diversified as possible.”

The fund, which manages Norway’s surplus oil revenue and holds $136,000 for each of its five million citizens, has been reducing its investments in Europe while increasing its exposure to emerging markets.

In March the Norwegian government said that the share of European investments in the fund’s portfolio would be reduced over time to 41 percent from 54 percent, while Asia-Pacific’s share would rise to 19 percent from 11 percent.

The share of emerging markets is set to increase to 10 percent from 6 percent. Africa is not given a distinct allocation.

Grande declined to name specific countries but said the criteria for selection included the size of economies and market sophistication. This suggests that Nigeria, Africa’s most populous nation and biggest oil producer, would be in the picture.

Natural candidates

“Typically, the markets with a certain level of developed capital market infrastructure (would be selected), a certain level of size because this is a large fund,” Grande said. “That typically means the larger economies, the more populous nations.”

Grande said he would not rule out allocations to additional African countries in the next two to three years.

“If they keep developing the way they have, then they’re natural candidates for inclusion in our portfolio,” he said.

Sub-Saharan Africa is home to some of the world’s fastest-growing economies, with countries such as Mozambique, Kenya and Ghana attracting significant foreign investment after oil and gas finds.

The International Monetary Fund projects growth of 5 percent in the region this year and next.

Norway’s oil fund had 57 equity investments worth $1.6 billion in South Africa, the continent’s biggest economy, at the end of last year. The investments spanned the mining, telecoms, consumer goods and banking sectors.

Holdings included AngloGold Ashanti, telecoms group MTN, media company Naspers and Standard Bank Group, Africa’s biggest bank by assets.

Its South African fixed-income exposure was $170 million, predominantly in government bonds.

The fund held 1.1 percent of the world’s listed equities and 0.6 percent of global bonds at the end of 2011.

In the third quarter of this year the fund’s investments grew 4.7 percent on the back of a global stock market rally, compared with a second-quarter loss of 2.2 percent.

The fund also cut its holdings of French and Spanish government debt and increased its exposure to South Korean, Mexican and Russian government bonds. ($1 = 5.6 Norwegian krones)

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