Norway wealth fund increases Sri Lankan assets in portfolio
The Norway Government's behemoth sovereign wealth fund has added four Sri Lankan companies to its equity portfolio and divested two in 2022 in a challenging period when it increased the market value of its assets such as equities and fixed income, in Norwegian kroner terms.
‘The Government Pension Fund Global’, has prudently built up an enviable US$1.3 trillion assets base over the years, ensuring the economic security of the country and its people.
The wealth fund now has 22 Sri Lankan companies of various sectors compared with 20 in 2021. It has added Nestle Lanka Plc, Renuka Agri Foods Plc, Hayleys Fabric Plc, and Hela Apparel Holdings, the fund’s annual filings show. Commercial Bank of Ceylon Plc and CT Holdings have been divested from the portfolio.
The wealth fund operates under Norway’s Ministry of Finance. Built up with North Sea oil revenues from its early days, it is also known as an “oil fund’’. Records note that the fund’s first money was deposited in 1996.
While the Norway Government’s fund holds valuable corporate assets in Sri Lanka, neither Sri Lanka’s many leaders and finance ministers in the 75 years since independence, nor the overrated and deified local economists and accountants who led the Central Bank of Sri Lanka and its monetary board, have been able to build a nest egg for the country due to sheer incompetence. In recent years, many of the CBSL’s governors are not known to have even managed a unit trust.
‘The Government Pension Fund Global’, holds 0.18% equity in Nestle Lanka Plc and its market value is US$233,192 as of December 31, 2022. In Hela Apparel Holdings Plc, it holds 1.7% with a market value of US$516,353. In Renuka Agri Foods Plc it holds 0.56% and the market value is US$48,053. The wealth fund’s 0.07% holding in Hayleys Fabric Plc has a market value of US$16,994.
John Keells Holdings Plc and Teejay Lanka Plc, are among the two largest holdings in terms of market value in the fund.
The wealth fund holds a 2.3% interest in John Keells Holdings Plc and the market value is US$11.741 million. In 2021, it held a 2.41% interest. It also has a 1.55% interest in John Keells Hotels Plc, under the consumer discretionary category. It has a market value of US$1.014m. In 2021, the fund held a 1.41% interest, representing a US$1.48m market value.
The Norway fund has a 3.14% holding in Teejay Lanka Plc, a fabric provider for branded clothing. Its holding is valued at US$1.942m. The Employees Provident Fund and Employees Trust Fund Board are among the 20 biggest shareholders of Teejay Lanka, holding 0.97%, and 0.37% respectively. Brandix Apparel Group Chief Executive Officer, Ashroff Omar, is a non-executive director.
In the second quarter of financial year 2022/23 Teejay Lanka reported net profit of Rs 1.09 billion, up by 70% against the same quarter the year before.
In some companies the wealth fund has increased its interest, and in others it has pared down its holdings.
The value of its holdings in Sampath Bank Plc has more than halved from 2021. In 2022, the wealth fund’s 1.04% shares in the bank were worth US$1.109m compared with US$2.94m in 2021, when it held 1%. On February 3, 2021, the bank’s shares traded at Rs 180 per share and on February 20, 2023, the share traded at Rs 49. On October 10, 2017, it had traded at Rs 338.
The market value of the wealth fund’s 2.36% equity in Hatton National Bank Plc has fallen sharply to US$2.715m compared with US$8.271m in 2021.
Norway’s wealth fund, which aims to generate “the highest possible return with acceptable risk’’ is a shareholder in 9,228 companies in 63 countries.
The fund says its long-term return depends on a sustainable economy, well-functioning markets and good corporate governance.
Chief Executive Officer Nicolai Tangen notes that the wealth fund depends on boards doing their job and that strong boards that can exercise effective oversight of management are fundamental for value creation.
In a backdrop of high interest rates and high inflation in 2022, the wealth fund’s returns on equity investments dropped by 15.3%, and the return on the fixed income fell by 12.1%. Investments in unlisted real estate returned 0.1% and the return on unlisted renewable energy infrastructure was 5.1%. The overall loss was a record US$164 billion.
Between 2014 and 2022 the wealth fund has offloaded six companies related to India’s Adani Group, including Adani Power and Adani Wilmar.
The wealth fund had amassed a value of 12.42 trillion Norwegian kroner as of December 31, 2022.