February 28, 2017 / 9:15 AM / 5 months ago

UPDATE 2-Norway's wealth fund investments in U.S. reach record high

4 Min Read

* Shares of U.S. investments in portfolio at record

* Neutral on present level of investments -CEO

* At ease with present level of exposure to China

* But they will have to rise considerable in time-CEO

* 2016 return means each Norwegian earned $10,000 (Recasts with U.S., China)

By Gwladys Fouche

OSLO, Feb 28 (Reuters) - Norway's $900-billion sovereign wealth fund, the world's largest, is neutral on investing in the United States despite its share of U.S. investments in its portfolio reaching a record high, its CEO said on Tuesday.

The fund also said it was comfortable with its present level of investments in China, the world's second largest economy, but that they would have to rise "considerably" at some point.

It invests the proceeds from Norway's revenues from oil and gas production in foreign stocks, bonds and real estate. Its value corresponds to about $171,000 for every Norwegian man, woman and child.

The U.S. is the largest country holding for the fund, representing 42.3 percent of the fund's total value at end-2016, or roughly $380 billion, against 38.9 percent at end-2014.

"We are currently neutral regarding our investments in the U.S. with the actual portfolio as well as the reference index from our owner, the (Norwegian) finance ministry," said CEO Yngve Slyngstad.

"The major shift in the portfolio in the past few years has been more investments in the U.S. and less in Europe," he told reporters during a news conference presenting the fund's 2016 results.

He declined to answer questions about the Trump administration, whose protectionist agenda clashes with the fund's global investment approach.

The fund earned a return of 2.17 percent in the fourth quarter due to strong equity markets, and 6.9 percent for 2016 - the equivalent of earning $10,000 for every Norwegian.

China

On China, Slyngstad said he was comfortable with the fund's current exposure to the world's second-largest economy, despite it representing just 2.0 percent of the fund's overall value at end-2016, or roughly $18 billion in stocks and bonds.

As a long-term, global investor, the fund is keen for its portfolio to reflect the balance of the global economy.

"We are currently at ease with the investments we have in China," said Slyngstad. "But we recognise that it is a very large market and that in time the fund will have considerably more investments in (China). But we cannot say anything about the timing."

Norway's wealth fund is often touted as a model for others to follow and many will seek their advice, which the fund will often share.

Speaking generally, Slyngstad told Reuters that "we of course, from time to time, discuss with other sovereign wealth funds, present and potential future ones, on the investment strategy."

He declined to say whether the fund had received a request for advice from Saudi Arabia on how to run a wealth fund, which Riyadh plans to do after its IPO of oil firm Saudi Aramco.

First Yearly Withdrawal

In 2016, the Norwegian state withdrew 101 billion crowns to pay for public expenses at a time of declining oil and gas revenues, the first year it does so.

The fund also said it expected its size not to grow at the same rate between 2017 and 2019 as it did between 2014 and 2016.

"The fund has more than doubled in size over the past five years," Slyngstad told a news conference. "We have had an unusual good return ... We can't expect the same return ahead." "We have been lucky that the high returns have happened when the value of the fund has been high." (Reporting by Gwladys Fouche; Editing by Terje Solsvik and Tom Heneghan)

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