Wednesday 26 October 2016

Top sovereign wealth fund puts €1.2bn bet on corporate Ireland

Published 14/06/2015 | 02:30

Statues in Vigeland park in Oslo, Norway
Statues in Vigeland park in Oslo, Norway

The Government Pension Fund of Norway, the world's biggest sovereign wealth fund, has built up a $1.34bn (€1.19bn) stake in Irish companies.

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The $916bn fund, which is financed by the sale of the country's vast oil and gas reserves, has invested in 24 different Irish companies. Norway is western Europe's biggest oil exporter and levels up to 80pc tax rates on the profits from the sale of its oil and gas reserves.

The fund, which is often referred to as the Oil Fund, invests abroad to avoid stoking inflation and pushing up interest rates and the krone.

The largest of the fund's Irish investments is a $486m stake in Smurfit Kappa, giving it control of a tenth of the paper and packaging business.

Other large investments include a $209m bet on Ryanair, $224m in BoI, $144m in Kerry Group, $77m in Paddy Power and $51m in Glanbia.

It also has an $18m stake in Aer Lingus. Smaller investments include stakes in insurer FBD, Domhnall Slattery's aircraft leasing business Avolon and Circle Oil.

The fund recently began implement an important change in its approach to voting at companies' shareholder meetings, in a bid to become a more active investor.

This year it is aiming to give prior notice of its voting intentions at the annual meetings of up to 10 companies it backs, with the "clear ambition" to expand the practice to more of the 9,000 companies in which it holds stakes. This could influence other shareholders votes.

The fund also has $410m in Irish sovereign debt, a sum dramatically reduced in recent years. In 2011 it had four times as much in Irish debt.

It is not the only big international investor to do this. The Templeton Global Bond Fund - the largest bond fund in the world with more than $70bn under investment - has also sold most of its holding in Irish bonds.

While the Oil Fund also invests in property across Europe, it has no Irish real estate. However this may soon change. It is rumoured to have expressed interest in buying NAMA's crown jewel loans, that would give it control of Dundrum Town Centre and which were recently put up for sale.

The fund is managed by Norges Bank Investment Management, a division of the country's central bank. It invests across Europe (39pc), North America (39pc), Asia and Oceania (18pc) and the rest of the world (4pc).

It returned 7.6pc in 2014, its smallest gain since posting a loss in 2011. However the first quarter of 2015 was its best ever, returning 5.3pc. This earned it more money than the Norwegian government spent in the same period.

Paradoxically, given that the fund is financed by oil and gas, it is also one of the most ethically managed in the world.

Earlier this month it committed to selling off many of its investments related to coal, making it the biggest institution in the world to abandon at least some fossil fuel stocks. The Norwegian parliament voted to order the fund to shift billions of euro out of companies which rely at least 30pc on coal.

The Church of England has also said it will drop companies involved with coal or oil sands from its $14bn investment fund, while the French insurer Axa said it would cut some $560m in coal-related investments from its portfolio.

Sunday Indo Business

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