Norway's sovereign wealth fund raises bets on corporate bonds in India

The fund has added two new names - Adani Ports & Special Economic Zone and Britannia Industries - show the fund's latest disclosures

The world’s largest sovereign wealth fund, Government Pension Fund Global of Norway, is raising bets on corporate bonds in its India fixed income portfolio.

According to the fund’s latest disclosures, it has added two new names — Adani Ports & Special Economic Zone, and Britannia Industries. Its investments are worth around $100 million in the Adani venture and around $250,000 in Britannia. 

The total proportion of corporate bonds in its India fixed income book has gone up from 5.1 per cent to 8.2 per cent as of 2019. Other holdings include Reliance Holding USA and Reliance Industries. The two companies account for another $95 million in debt assets.

Government of India debt securities account for the bulk of its holdings. The fund held instruments worth $2.16 billion. 

The figure was $1.96 billion last year. It also held Export-Import Bank of India instruments under “government-related bonds”. Investments in Reliance Industries had also been classified as “government-related bonds”.

In response to a query from Business Standard, a spokesperson for the fund said it was a classification error.

“Bonds denominated in dollars, euros, pounds and yen climbed from 82.6 per cent to 84.6 per cent of fixed income investments. Debt instruments issued by governments and companies in countries classified as emerging markets will be limited to 5 per cent of the market value of the bond portfolio going forward,” the fund said in its annual report.

Norway established the fund after its oil discoveries to provide a cushion against oil price fluctuations and help meet future needs. It invests across asset classes, including equities, fixed income, and real estate. 

The fund is now worth over $1.1 trillion, about 70.8 per cent of which is invested in equities. Fixed income accounts for 26.5 per cent. 

“In the first years, returns were low, but the fund grew due to large inflows. In the past decade, the fund has had lower inflow, but the return (was higher)…The strong return the past decade was facilitated by the equity purchase… during the financial crisis. The fund is now worth more than the Norwegian people’s combined net wealth and three times the country’s GDP. We now have wealth invested in the world’s financial markets that exceeds the government’s total oil revenue over the past 50 years,” according to the report.

Instruments that are no longer in the fixed income portfolio of the fund include REC and Power Finance Corporation.