Norwegian oil fund cuts ties with Pimco and BTG Pactual

Norway's $830bn oil fund has cut ties with Pimco and BTG Pactual as part of its overhaul of the world's largest sovereign wealth fund. The sovereign fund pulled its money from Pimco last year due to investor fears over underperformance at some of the Pimco's largest fixed income funds as well as the acrimonious departure of its founder Bill Gross; this is a further blow to Pimco who suffered €125bn of outflows from investors last year and the withdrawal could prompt other sovereign funds to reassess whether to hold money with the firm. The sovereign fund dropped BTG Pactual after the bank suffered heavy redemptions as it became embroiled in the vast Petrobras corruption scandal last year. 

Norway's $830 billion oil fund has severed ties with Pimco, the bond house, and BTG Pactual, the Brazilian bank, as part of an overhaul of how the world's largest sovereign wealth fund is run.

The oil fund, which is considered one of the world's most prestigious investors and which has become a prized client for big asset management companies, has invested with Pimco since at least 2013.



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The sovereign fund pulled its money from the Californian bond house last year after widespread investor fears took hold about underperformance at some of Pimco's largest fixed income funds and the acrimonious departure of its founder, Bill Gross, in late 2014.

The divestment is a further blow for the Newport Beach-based asset manager, which suffered 125 billion euros of outflows from investors last year. The level of money from external clients fell 6 per cent last year, to 987 billion euros. Pimco declined to comment on the oil fund's departure. The withdrawal could prompt other sovereign funds to reassess whether to hold money with Pimco. Amin Rajan, chief executive of Create Research, the asset management consultancy, said: "Losing a mandate from an iconic investor like the Norwegian oil fund is like losing the main feather in your cap. It will raise many eyebrows among other sovereign wealth funds." The sovereign fund also dropped BTG Pactual during the course of last year. The bank suffered heavy redemptions in 2016 after it became embroiled in a vast corruption scandal at Petrobras, the Brazilian oil group. Its mutual fund assets nearly halved last year, to $14 billion, after the bank's chief executive was arrested for allegedly conspiring to interfere in a police investigation into corruption at the oil company. André Esteves has denied any wrongdoing and was released in December after spending a month in jail. BTG Pactual declined to comment.

Alexandre Yamashiro, an analyst at Fitch, the rating agency, said: "Whether warranted or not, investors decided to reduce their exposure to BTG Pactual as there are concerns [about the] implications for the group [from the Petrobras] investigation."

Norges Bank Investment Management, which oversees the oil fund, would not specify the size of individual external investment mandates but it had 297 billion Norwegian krone ($35 billion) invested with external managers at the end of 2015. This included three fixed income managers: Ashmore and Franklin Templeton, which have been in place since 2014; and Investec Asset Management, which was added last year.

