Norway fund eyes $20 billion oil windfall

Norway's $570 billion sovereign wealth fund could get a $20 billion windfall to invest in 2011 as oil prices surge, the fund's asset allocation chief told Reuters in an interview.
"Generally speaking, $10 of increased oil price translates into $6 billion of increased revenue for the government, so with oil prices at the level they are now we are looking at maybe $20 billion over and above what we budgeted with," Martin Skancke, director general of the asset management department at Norway's Ministry of Finance, told Reuters Insider TV.
Those extra inflows would be used for rebalancing the so-called oil fund, he said. Brent crude rose above $122 a barrel on Wednesday, helped by a rebound in equities and a weaker dollar. "Relative to market cap we were a bit overweight in equities by the end of last year. We have a rebalancing of the portfolio so we try to stick to the strategic weights of 60 percent equities, but of course because of market movements we will deviate from time to time," Skancke said.
"In a portfolio of 60 percent of equities obviously much more than 60 percent of the risk is coming from listed equities, so I think when we talk about perspectives for evolving the strategy over time we want to see whether we can have more diversification across different systematic risk factors," he said.
Norway's government said earlier this month that its sovereign wealth fund would over time reduce exposure to European assets as they decline in significance globally and may up stakes in emerging markets. More than half of the oil-revenue-backed SWF's $570 billion capital is invested in European stocks, bonds and real estate.
Analysts at J.P. Morgan think revenues at oil exporting nations could top $1 trillion this year as the price of crude surges. That would trigger a near $300 billion recycling of petrodollars into financial markets, with most of it heading towards equities and underwriting a double-digit rally. To see an analysis programme including Skancke, the head of sovereign wealth fund investments at BNP Paribas Investment Partners and the head of asset allocation at J.P. Morgan, click on this link http://link.reuters.com/neq98.