– We should perhaps not call it a stroke of genius. But so far it’s been smart. Very smart, says Robert Næss, investment director at Nordea.
Næss comments on the trend where more and more of households’ fund savings are being sent out of the country.
Figures from the Verdipapirfondenes forening show that almost all new fund savings in the past twelve years have been invested in mutual funds that invest in foreign companies – and very little in mutual funds on Oslo Børs.
While NOK 600 million has flowed into Norwegian mutual funds as “new” money in the period, the corresponding figure for international funds is NOK 56 billion.
With the result in hand, it has been very profitable. For a Norwegian who owns foreign shares, the value rises when the krone exchange rate weakens against the currency in which the share is listed.
During the period, the krone has almost halved in value against the US dollar, figures from Norges Bank show. While one dollar cost NOK 5.57 at the end of 2012, the price is currently close to NOK 11.
In a global equity fund that tries to mirror the global equity markets, 7 out of 10 kroner are typically invested in American companies.
– Since 2012, Norwegian shares have given an excellent return, of 200 per cent, says Næss.
If you invested NOK 10,000 at the time, this means that the investment is now worth NOK 30,000.
– It’s more than usual. Global shares, by comparison, have given a 500 percent return, more than double that. So it has been the right step for households to move more savings out, says Næss.
Most people have been smart, says investment director Robert Næss at Nordea.
Photo: Nordea
What has really accelerated earnings is the devaluation of the krone during the period. It has doubled the return.
People who save can also choose to avoid currency effects on their savings. But also adjusted for currency, you have made the most money by saving in foreign shares.
International shares hedged against currency fluctuations have given a 250 per cent return in the period, compared to a 200 per cent return in Norwegian shares.
Most people invest as the Oljefondet
Oil fund manager Nicolai Tangen recently hosted an investment conference at Norges Bank. The fund only invests abroad.
He will not advise people on how to invest their money.
Oil fund manager Nicolai Tangen says that some savings abroad can be a great way to spread the risk.
Photo: Håkon Mosvold Larsen
– No, it must be up to each individual how they want to invest their money. It’s a nice freedom people have, says Tangen.
– But people have invested to a greater extent as the Oljefondet in the last decade. It hasn’t been so stupid has it?
– In general, you have to divide your money between different investments. And it is clear that when you have parts of your investments abroad, it can be a great way to spread the risk, says Tangen.
The oil fund is invested with 7 out of 10 kroner in shares and the rest in interest-bearing securities and some property. Not unlike a private person with a savings account in the bank and holdings in a global equity fund. And maybe your own home.
– Absolutely right and smart
Håkon Hansen is executive vice president for asset management at DNB. He says that the development is also in line with good advice.
– The krone’s recovery has made it more attractive to invest abroad, says Håkon Hansen, executive director of DNB.
Photo: @S Stig Bjarne FI / @S Stig Bjarne FI
– This is absolutely correct and smart. The Norwegian stock exchange accounts for less than 1 percent of the total values in the world. “Having all your money in a small basket like the Norwegian stock exchange is a higher risk than spreading it across several stock exchanges all over the world,” he says.
Hansen says that share savings abroad have been profitable for several reasons.
– One is the devaluation of the krone in recent decades. This has made it even more attractive to be invested abroad. The second is that several of the large sectors such as technology are largely created out there, he says.
