CEO of world's biggest sovereign wealth fund turns to Africa for profits

OSLO (Bloomberg) - Norway's sovereign-wealth fund is pouring a bigger share of its cash into Africa in a bid to capture some of the fastest growth in the global economy.

The US$890 billion fund, which is already in South Africa, is spreading its investments to the north and west of the continent in search of opportunities, Yngve Slyngstad, chief executive officer of Norges Bank Investment Management, which manages the fund, said in an interview on Wednesday at Bloomberg's headquarters in New York.

"What's new is that we have crept north - Kenya and Nigeria - we're looking at quite a few west African countries," he said. "In North Africa, for quite some time, we've been invested in Morocco and Egypt, there are also some investments coming in Tunisia."

Africa has emerged as one of the fastest growing regions globally. And while the slump in oil has hurt Nigeria and Angola, the International Monetary Fund still sees growth rates for Sub-Saharan Africa that are twice those for developed nations. The number of middle-class households in the region has tripled since 2010, according to Johannesburg-based Standard Bank Group Ltd.

The wealth fund is expanding into emerging and frontier markets as returns in the developed world get eroded by historic monetary easing programs.

"It's fair to say that monetary policy does affect pricing in today's market to such an extent that monetary policy itself has been a risk you have to watch," Slyngstad said.

He may also get the go-ahead next year to invest in infrastructure projects and to add more real estate to the fund's swelling portfolio, as Norway looks into the merits of such a move. As the fund expands its geographical reach, it relies on local investment advisers to guide its decisions.

"There are several countries that are coming up," Slyngstad said. "All of these investments are done by external managers, generally by managers in the same country. It means our external managers team has been flying around a lot in the last year, they've had a lot of flights to Africa."

Last year, the wealth fund returned 7.6 per cent, its smallest gain since it posted a loss in 2011. It raised its holdings in emerging markets to 10.6 per cent, adding countries such as Ghana and Mauritius. The fund also invested in Nigeria's currency for the first time.

Meanwhile, its investments in Europe fell to 39.3 per cent from 45.2 per cent a year earlier. The fund's holdings in North America rose to 38.9 per cent of the total from 32.8 per cent. Investments in Asia and Oceania climbed to 17.5 per cent of the portfolio.

The investor, which gets its guidelines from the government, is mandated to hold about 60 per cent in stocks, 35 pe rcent in debt and 5 per cent in properties. Though the fund mostly follows global indexes, it has some leeway to stray from those benchmarks.

"Frontier markets for us isn't an exception, it's a rule that we will be invested if there is a possibility," Slyngstad said. "We will invest in a market if it's a well-functioning market. As soon as a market satisfies our minimum requirements, we will be investing there."