Specialised external mandates
NBIM uses external managers to handle parts of the Government Pension Fund Global. Investment mandates are awarded to managers with expertise in clearly defined investment areas. The aim is to use this expertise to identify investment opportunities that will generate an excess return.
Approximately 12 percent of the fund’s assets were under external management at the end of 2009, down from 13 percent a year earlier. There were a total of 75 mandates managed by 45 different institutions, 70 of which were equity mandates. The market value of externally managed equity mandates was 286 billion kroner at the end of 2009, equal to 17 percent of the fund’s equity investments. Externally managed fixed-income mandates had a market value of 32 billion kroner at the end of 2009, equal to about 3 percent of the fund’s fixed-income investments.
The number of fixed-income mandates has been gradually reduced following a restructuring of the fund’s fixed-income management in 2008 and 2009. The fund had five external fixed-income managers at the end of 2009, down from 14 at the end of 2008 and 38 in 2007. All five were specialist mandates and mainly for US mortgage bonds.
Many of the fund’s external equity mandates are in markets with potential to generate excess return through active management. This is particularly the case in emerging markets, because these often are less efficient than established markets. In an efficient market all investors have access to the same information at the same time, so that market prices always reflect this information. Inefficiencies may result in a mispricing of assets that competent investors can exploit. The fund has increasingly awarded specialised external equity mandates in emerging markets including Poland, Russia, Turkey, China, India, Indonesia, Malaysia, Thailand, Brazil and South Africa. The number of equity mandates based on broad regional strategies has dropped in favour of this more specialised approach.
