Over the years, our friends at the Norway Sovereign Wealth Fund have gone from jeered to cheered. To wit from March 30: "Remember this from September 2010? "Norway, which has amassed the worlds second-biggest sovereign wealth fund, says Greece wont default on its debts.
The point is, do you expect these guys to default? said Harvinder Sian, senior fixed-income strategist at Royal Bank of Scotland Group Plc, in an interview. Norway has taken the view that they will not. The Greek holdings are particularly interesting because the consensus in the market is that they will at some point restructure or default.
Norway says its long-term perspective will protect it from losses. One could say we are investing for infinity."... Uhm, Big Oops. Needless to say, this stupidity was roundly mocked by Zero Hedge at the time. Yet we can only applaud the fact that unlike other European investors (read primarily Italian banks) which are merely sinking ever deeper into the quicksand by dodecatupling down on pyramid scheme assets, the Norwegian SWF finally "plans to sharply reduce its European exposure while raising investments in emerging markets and Asia-Pacific, the finance ministry said on Friday."
While we ridiculed their stupidity in 2010, we applaud Norway's prudence in this case, as unlike other insolvent European entities, the crude-rich country is not falling for the latest round of central planning bullshit, and is finally acting as a fiduciary agent. "We're reducing our European exposure because we see that economic development in the global economy is changing and this should also be reflected in our investment strategy," Johnsen said. "Most likely we'll have to sell some assets in Europe." Remember: in game theory he who defects first, defects best. We expect to see many more funds openly declaring they will commence dumping European assets, all of which are buoyed 100% artificially by the ECB, and US taxpayers, shortly."
One month later the purge is over: "Norways sovereign wealth fund sold all its Irish and Portuguese government bonds after rejecting the Greek debt swap and warned that Europe faces considerable challenges." Wait, what's that? The Eurozone's political strongarming (think Steve Rattner and GM) was unable to force the world's most powerful sovereign wealth fund into agreeing to what was essentially extortion when bank after bank noted how delighted they are to be bent over and take an 80% writedown on their Greek holdings. Stunning. But at least we now know who will be suing Greece shortly in an attempt to recoup par value of their strong law bonds: grab the popcorn - Norway vs Greece will be quite a spectacle. As for their dump of Irish and Portuguese bonds, no surprise there: fool me once (in perpetuity) shame on me, fool me twice, shame on Dan Loeb... who was buying everything Norway was selling. We wonder who ends up right.
The $610 billion Government Pension Fund Global returned 7.1 percent, or 234 billion kroner ($41 billion), as measured by a basket of currencies, in the first quarter, the Oslo-based investor said today. Its equity holdings gained 11 percent while its fixed-income investments rose 1.6 percent.
The fund, which voted against Greeces debt swap this year because it disagreed with being subordinated to the European Central Bank, also said it reduced debt holdings in Italy and Spain amid a broader strategy to cut investments in Europe. The fund added government bonds from emerging markets such as Brazil, Mexico and India.
Predictability is important for a long-term investor and the euro-area faces considerable structural and monetary challenges, Yngve Slyngstad, chief executive officer of Norges Bank Investment Management, said in a statement.
Stocks jumped globally in the quarter after the European Central Bank stepped in with more than $1 trillion in three-year loans to the regions banks. The rally was tempered toward the end after Spain announced in March it would miss a deficit target and as austerity measures dragged euro-region economies into a recession and boosted unemployment to a 15-year high.
Wait, so precisely the two things we noted in our Subordination 101 post: namely priming subordination nd lack of visibility in a world in which any investor can be crammed down at any moment, are being amplified by the world's biggest sov wealth fund? Good to know. Sadly, to everyone else who has been buying worthless bonds in an ECB-subsidized, furious and futile attempt to dodecatuple down on the worst of the worst in European paper we have one message: enjoy your transitory gains why you can. With SPIs coming to all the other PIIS countries shortly, those who bought first (in 2012) will promptly be last.