Norway sovereign wealth fund ups India bets amid rise in equities

The Government Pension Fund Global, Norway's $1.4-tn sovereign wealth fund that holds 1.3% of all the world's listed companies and is the largest in the world, raised its Indian bets last year

The Government Pension Fund Global, Norway’s $1.4-trillion sovereign wealth fund that holds 1.3 per cent of all the world’s listed companies and is the largest in the world, raised its Indian bets last year amid a sustained rise in Indian equities.
 

Its Indian holdings as a percentage of its total equity portfolio rose by 30 basis points (bps) year-on-year (YoY) in calendar year 2021 (CY21) to 1.6 per cent, the fund’s annual disclosures show. The rise in holdings comes amid a sustained selling spree by foreign portfolio investors (FPIs) that have dumped Indian shares worth more than $20 billion since last October.
 

Emerging markets (including frontier markets) accounted for 10.5 per cent of the fund’s equity investments. China was its single largest emerging market, accounting for 3.8 per cent of total investments, followed by Taiwan at 2.3 per cent and India.
 

The fund’s Indian investments were spread across 375 companies at the end of CY21, and had a market value of about $15.8 billion, a 27 per cent increase from $12.4 billion the previous year. The fund had invested in 320 Indian firms in 2020.
 

None of the Indian companies were part of the fund’s top 20 equity investments that featured Apple ($24 billion), Microsoft ($23.1 billion) and Alphabet ($16 billion) among the top three. Reliance Industries ($1.45 billion), Infosys ($1.18 billion) and HDFC ($0.66 billion) were the fund’s top Indian bets.

The other names among the top 10 India holdings included ICICI Bank, Axis Bank, State Bank of India, and technology firms such as TCS, Tech Mahindra and Wipro.
 

To be sure, the fund has booked some profits from its Indian holdings, which is reflected in the provision amounting to 3.47 billion kroner (about $381 million) it has set aside for taxes on capital gains for 2021. India’s benchmark indices gained 24 per cent in local currency last year.

 

Norway’s pension fund, whose equity portfolio tops $1 trillion and is spread across 9,338 companies, has been pushing for more sustainable investments in recent years. Last year, it excluded ONGC from its portfolio due to concerns over the company’s business in South Sudan. This year it has put Adani Ports on its watch list for possible exclusion from investment due to ethical concerns.
 

“We divested from 52 companies in 2021 following assessments of environmental, social and governance risks. Nine of these companies were identified through our pre-screening of companies being added to the FTSE Global All Cap index, which is the fund’s underlying benchmark index,” the fund said in its annual report.
 

The fund’s environment-related equity mandates returned 21.6 per cent in 2021.

Since its inception in 2010, the annualised return on equity investments has been 10.4 per cent. At the end of 2021, it had 107.7 billion kroner (about $12 billion) invested in environment-related equity mandates.
 

It remains to be seen if the fund will trim its Indian holdings in CY22 in the backdrop of the Russian invasion of Ukraine.

“Indian stocks have held up remarkably well despite the rise in oil prices, possibly due to a combination of a change in macro funding mix to FDI, falling oil intensity in GDP, high real relative policy rates and a strong domestic bid on stocks.

That said, the length of the military action in Ukraine could determine its impact on earnings and multiples. FY23 earnings estimates have been cut by 8 per cent to reflect lower GDP growth forecasts,” said Ridham Desai, head of India research and India equity strategist at Morgan Stanley in a recent note.