Norway’s oil sovereign wealth fund sold all its holdings of Irish and Portuguese government debt and reduced its ownership of Spanish and Italian bonds as part of a continuing protest over its forced participation in Greece’s debt restructuring.
The fund, which has more than $600 billion of assets under management and owns 2 per cent of European equities, said the euro zone still faced big problems and the Greek debt deal had worsened matters.
“Predictability is important for a long-term investor and the euro area faces considerable structural and monetary challenges,” said Yngve Slyngstad, chief executive of Norges Bank Investment Management, the official name of the fund.
The comments are one of the most explicit warnings by a big-name investor of the negative consequences of the Greek debt restructuring on all of the euro zone’s government bond markets. They reveal that many investors are shunning the euro zone because of how it has managed the debt crisis.
Norway’s oil fund, which has about 40 per cent of its assets in bonds, objected to the Greek debt restructuring on two grounds. First, it disliked how the European Central Bank, European Investment Bank and possibly other official entities managed to get their holdings excluded from the writedowns.
The second objection was to the retroactive use of so-called collective action clauses, which compelled the fund to take face-value losses of 53.5 per cent despite voting against the restructuring.
– (Copyright The Financial Times Limited 2012)
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