Norway’s VFF criticises interpretation of industry in crisis

The Norwegian Fund and Asset Management Association, VFF, has said that it is disappointed with the way statistics, such as those for equity fund flows, have been interpreted to paint a picture of crisis in the industry.

The reaction comes after various statistics from sources such as local regulator Finanstilsynet and Morningstar, were used to suggest a pattern of fund closures and investors dropping out of the funds market in recent years.

But the suggestion that the entire domestic fund industry is on a path to implosion, or that local equity funds in particular are set to be subject to unending net redemptions is wrong, said VFF managing director Lasse Ruud in a comment provided to InvestmentEurope today.

“At the start of 2008 the total net assets in the Norwegian fund industry [were] NOK410bn. By the end of October 2012 it had grown to more than NOK546bn, which is an all time high, and more than 30% above the level of assets managed before the financial crisis.”

“During this period the industry has received a net inflow of NOK133bn. So far in 2012 (until the end of October), the net inflow has been over NOK35bn. Representing more than 6% of total assets, this inflow is regarded as strong.

“The inflow trend during the last months has been that both individuals and institutional investors tend to invest in bond funds, and in particular bond funds mandated to invest in the high yield segment. Equity funds, which used to be a dominant asset class within the Norwegian fund industry, has been less popular than normal, however still facing positive inflow in the segment of institutional clients. Inflows in equity funds from retail clients accumulates to zero so far this year, whereas retail clients are contributing with relatively strong inflows into bond funds – NOK4.3bn.”

Ruud went on to state that the figures cited from the regulator were not as up to date as those held by VFF.

Challenge

Other data published in Norway suggest that in terms of asset classes the country’s red hot residential property market will continue to fight for a share of retail investors’ wallets.

Average residential property prices are up more than 7% over the past year, but are up much more sharply in certain urban areas of the country.

Last year the country’s central bank noted in its analysis of the state of the property market the key fundamental gap between supply and demand in key local property markets in the country.

The figures below show the increase in number of households (in blue) versus the number of finished residential property units (in yellow) for 2010. There is no further strong evidence to suggest that the trend spotted by the bank last year has turned.

norges-bank-boliger2

But, for the equity investor there is still a long term argument in favour of equities, according to data from FE and elsewhere.

Over the 10 years to 22 November, the FTSE Norway Index total return rebased in euros was over 297%. For the MSCI Norway on a similar basis the return was over 262%, FE data suggests.

And the OBX Index, which includes the 25 most traded shares on the Oslo Børs, is back at levels it traded at some five years ago, before the financial crisis also hit Norwegian stocks hardest.

However, those investors who bought into the index in November 2008, when the index traded at around 180 would have profited handsomely from the rebound, which has seen it rise to a level around 400-420 this year.

And consider the fortunes of the index’s biggest constituent by far: Statoil. Its own calculator for investors suggests that NOK1,000 invested a decade ago would have returned 318% with dividends reinvested, or an annual total return of over 15%.

 

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