Volatile markets impact Norwegian state oil fund

May 20, 2009, 10:53 GMT

Oslo - The fund that invests income from Norway's petroleum and gas riches for future pensions on Wednesday posted a 4.8 per cent drop in its first-quarter return, and said international markets remained volatile.

The drop in return equalled 66 billion kroner (10.1 billion dollars) - measured in international currency, the Norwegian central bank said.

During the quarter, 44 billion kroner was transferred to the fund, the lowest inflow since the fourth quarter of 2004, it said.

The fund, officially named the Norwegian Government Pension Fund - Global, was worth nearly 2.08 trillion kroner (318 billion dollars) at the end of the quarter, down 199 billion kroner compared to the end of 2008.

There were some positive signs, the central bank said, citing the rise in stock markets since mid-March and an upswing in emerging markets.

The fund's volatility has increased as it has raised its stake of shares compared to bonds - part of the fund's investment policy.

At the end of the quarter, the fund was estimated to own some 1.58 per cent of European equity markets.

At the end of 2008, the fund was estimated to own shares in some 7,700 companies worldwide.

The fund, managed by the central bank, was created to pay for Norway's future health and pension expenditure through investments outside the Norwegian economy.

The capital is invested in bonds, shares, money market instruments and derivatives.