The Norwegian Government Global Pension Fund (GPFG) again cut its investment in Spanish public debt at the end of the first half of 2023, the fund manager Norges Bank Investment Management (NBIM) revealed on Wednesday. The firm directed by Nicolai Tangen is one of the main investors in Spain through shares and bonds of companies and public administrations, but in the last three years it has significantly cut its investment.
According to the data compiled by ‘La Información’, the fund required its investment in bonds and letters issued by the Public Treasury of the Kingdom of Spain by 21% compared to December 2022, up to 27,124 million Norwegian crowns ( 2,380 million euros at the current exchange rate of 11.4 units with the euro).
This is the lowest figure in both currencies since 2012, when the European rescue of Spain took place through its banks because the risk premium was out of control, and both financial institutions and administrations had closed access to Credit or its cost was so high – close to 7% in the 10-year bond compared to 2.6% of the German at the same term – that they made the financing unsustainable.
If 2023 closes like this, the Norwegian fund will close its fourth consecutive year and will eliminate its exposure to Spanish public debt, a period that has coincided with the legislature of the PSOE-Unidas Podemos (Sumar) Government, which is running for re-election starting this June eves under the leadership of Pedro Sánchez and Yolanda Díaz.
The volume of state debt has risen by more than 300,000 million euros, to exceed 1.5 trillion, due to public deficits incurred year after year, including a record one in 2020 as a result of the pandemic.
At the same time, the average rate paid by the Spanish Treasury for all issues has just exceeded 2%, which represents an increase of more than 30% from lows. The interest burden of the public debt alone may reach 40 billion euros at the beginning of 2024, according to financial estimates.
However, the Government has had in its favor the reserve of European funds without reimbursement (refundable) worth more than 70,000 million euros and also with the lowest financing costs in history with negative rates and an open bar to auction debt in the markets thanks to the support given by the massive debt purchases of the European Central Bank (ECB).
Before the pandemic, the Nordic giant had more than 5,200 million euros of Spanish debt in its portfolio, according to data at the end of 2019. However, in just three and a half years it has cut it to less than half, in light of the data presented this Wednesday in Oslo by the body dependent on the Norwegian Government.
A sustainability fund with fossil foundations
The Norwegian Government Pension Fund Global (GPFG) wealth benefits both current and future generations through the government budget and pensions.
It was created in 1990 to protect the economy from the ups and downs in oil revenues and at the same time to create a financial reserve for the country, although the first contribution to the fund was not made until 1996, as explained on its website. Unlike the Japanese pension fund, whose ownership belongs to workers who contribute to Social Security, the Norwegian fund is the property of all the inhabitants and its ownership is public.
Although revenues from oil and gas production are channeled into the fund, these contributions represent less than 50% of the fund’s total value (1.3 trillion). Most of the capital has been accumulated through investments in stocks, bonds, real estate and renewable energy infrastructure, its latest leap in investment diversification.
Currently, this fund is positioned as one of the largest globally and holds around 1.5% of all the shares of listed companies around the world. The GPFP is a shareholder of 9,000 listed companies, as well as the owner of several buildings located in major international cities, which generate income through rentals. It is also a creditor of countries and companies through loans or the purchase of their debt issues.
