Mutual funds, quarterly figures, Q4 2008

Investors’ net sale of mutual funds shares was NOK 19 billion in money market funds, NOK 10 billion in equity funds and NOK 206 million in hybrid funds. Bond funds were the only type of fund in which there were net purchases; these amounted to NOK 822 million.

The high net sales contributed to the total mutual funds shares capital being reduced by about NOK 58 billion to NOK 317.3 billion from the third quarter to the fourth quarter of 2008. This amounts to a decrease of 15.5 per cent and is the second quarter in a row where the total value of mutual funds shares fell in value.

Investors reduce ownership in money market funds

Households, private enterprises and life insurance companies were the sectors with the highest net sales of mutual funds shares in money market funds. Their net sales were NOK 6.4, 5.3 and 2.1 billion respectively. These high net sales may be the result of investors losing on investments in money market funds due to the high increases in the money market rate of interest. In such situations it is natural for some investors to seek out investment alternatives that give a higher rate of return. During times of trouble, households may also have wanted to move their investments from these funds to a safer alternative such as deposits in banks. The statistics for financial corporations showed that households placed considerable amounts of funds in bank deposits in December 2008.

Households and private enterprises’ net purchases of mutual funds in the same period were NOK 1.4 and NOK 1 billion respectively. Conversely, life insurance companies’ net sales of shares in mutual funds totalled NOK 8.1 billion, but net purchases in bond funds were NOK 1.7 billion. This could indicate that companies in the life insurance sector have wanted to reduce the risk that their investments are exposed to. Such a move to safer securities is also confirmed in the statistics securities registered with the VPS for the fourth quarter, where the life insurance companies invested in safer interest-bearing securities such as bonds and short-term bonds.

Weaker currency reduced losses

The high volatility in the currency market during the fourth quarter resulted in the Norwegian currency falling in value in comparison with many other currencies, and particularly against the large currencies such as US dollars and the Euro. This affected the value of the securities owned by the fund in other countries. The value of bonds issued abroad increased by NOK 3 billion or approximately 10 per cent to NOK 33 billion. This increase is for the most part caused by a weaker Norwegian currency. The funds’ investments in foreign stocks fell from NOK 113.7 billion in the third quarter to NOK 90 billion in the fourth quarter. The fall in value of these investments is likely to have been greater if the Norwegian currency had not been reduced relative to other currencies.

Little change in ownership

Despite the high net sales throughout the quarter, life insurance companies were still the largest owner in mutual funds, with a share of 29.5 per cent. Households’ owner share was somewhat reduced to 25.8 per cent. Foreign investors owned NOK 31.3 billion of the total mutual funds shares at the end of the fourth quarter, or 9.9 per cent.