The fund is mandated to help improve liquidity and provide capital in the bond market by purchasing interest-bearing securities issued by Norwegian companies on market terms.
Folketrygdfondet’s management of the Government Bond Fund reflects the following principles:
- Companies in all sectors and industries may be considered for investment through the Government Bond Fund, including companies in the high-yield segment. Folketrygdfondet may invest in both the primary and secondary markets.
- The Government Bond Fund will not be invested in issuers with a rating of CCC/Caa2 or lower. Companies without an official rating will be classified by Folketrygdfondet in accordance with the same procedure as is used for the Government Pension Fund Norway. Folketrygdfondet’s in-house assessments generally employ the same methodology as official ratings.
- Issuers must be registered in Norway pursuant to section 1-2 of the Register of Business Enterprises Act, and must be headquartered in Norway. Issuers must meet requirements applicable to long-term borrowing in the bond market.
- Folketrygdfondet may invest a substantial proportion of the Government Bond Fund in new issues, subject to the requirement of participation by other investors to ensure correct market pricing.
- Bond issues must be arranged in the normal manner, by an arranger/brokerage firm. In the interests of transparency, all loans must be listed in a regulated exchange (we will be able to accept ABM in certain cases) and have a trustee.
- Folketrygdfondet will define credit limits for individual issuers to ensure risk diversification in the portfolio.
The Government Bond Fund is a temporary measure. Following an initial build-up phase, management of the fund will be gradually reduced. This will occur as bonds mature and through bond sales as the market situation normalises. The fund is likely to be wound up in several years’ time.