OSLO • After a market rally that lasted years, big active bets have lost their lustre for Norway’s domestic wealth fund.

The 220 billion krone (RM120.4 billion) Government Pension Fund Norway, the domestic counterpart of Norway’s sovereign wealth fund, is cutting risk.

“It’s been a long cycle,” CEO Olaug Svarva said in an interview on Tuesday. “We’ve had good results in both our stock and bond portfolio with our long-term view. Pricing makes us think that it’s natural to realise some profits.”

Folketrygdfondet, which manages the fund on behalf of the Finance Ministry and invests in only Norwegian and Nordic assets, returned 2% for the second-quarter, missing its benchmark by 0.1 percentage point. The stock portfolio, which is about 60% of the total fund, gained 2.7%.

“To be counter-cyclical is part of our investment strategy,” she said. “To go against the market is a big reason for our excess returns. Buying more when risk premiums are higher in the market.”

With about 27% of its fixed income investments in covered bonds, 24% in investment grade and 22% in government notes at end of June, bonds returned 1% for the fund as credit spreads continued to narrow in the quarter.

“It means that the risk premiums aren’t very high,” said Lars Tronsgaard, deputy MD. “We’ve made an adjustment where the credit risk is lower than we would’ve had if risk premiums had been high, because the outcome is perhaps bigger on the upside than the downside — it’s a natural adjustment.” — Bloomberg