Norwegian's Global Lavbeta II Fund Cuts Volatility With Low Beta Stocks

By Staff Writer

Apr 06, 2016 01:09 AM EDT

KLP, the Oslo-based pension and insurance provider has beaten the benchmark in five out of the past seven years. Its portfolio stratgy to bet on low beta stocks is a proven success.

The Fund, Aksje Global Lavbeta II was established in 2008 as an open-end fund. Domiciled in Norway, it was created with an objective on stocks with lower volatility than the benchmark. The Fund invests globally in equity with a quantitative methodology.

Magne Valen-Sendstad who manages about 100 billion kroner ($12 billion) of fund at KLP told Bloomberg in a Thursday interview. He said the Fund aimed to avoid the 2008 crash by focusing on lower volatility stocks. Bloomberg commented that the lower volatility can be a volatile business as the portfolio has performed surprisingly well.

"We want to avoid dips as in 2008 and now in January and February -- this portfolio outperformed a lot," Valen-Sendstad said. "It's proof in the pudding."

The Fund was opened to client in 2014 after began as pension fund. Still focusing on low beta stocks, the Aksje Global Lavbeta II performs well as it is able to manage downturn better than than other more volatile funds. Bloomberg reported last year the Fund returned 1.3%, a much better than 4% loss ot its peers.

"There's a volatility anomaly in the market," Valen-Sendstad explained further. "Over decades low volatility companies outperform the market. Why is it like that? And why doesn't that trade get crowded? It's still there and it has existed for a long time -- and it has delivered and delivered."

Kommunal Landspensjonskasse (KLP) is a Norwegian mutual insurance company. Its traditional clients are pension and insurance fund for municipal and county authorities. Along with that, KLP also manages health trusts and public sector companies.

KLP was established by Byforbundet (the Union of Norwegian Cities) and Herredsforbundet (the Norwegian Association of Rural Municipalities) in 1949. The company was founded to provide occupational pensions for local government employees. It also has a major subsidiary, KLP Eindom that manages a large portfolio of real estate in Norway and neighboring country.

Recently KLP Eindom just acquired a new office building as Property EU reported. KLP Eindom purchases the 14,900 m2 office building for €81 million ($92 million). The property was built by a subsidiary of Norwegian State Railways (NSB) in Bergen, southwest Norway.

Norway is the second wealthiest country in Europe based on GDP. Its government pension fund, the Norwegian Government Pension Fund Global (GPFG), is the largest sovereign wealth fund in the world. As the country has one of the most beautiful landscape, it also actively involves in promoting the environmental protection.

Recently GPFG has delisted 11 companies for conducting deforestration. Strait Times reported the GPFG action demonstrates finance sector power in pushing for greener practices for firms around the world.

Meanwhile, other Norwegian pension fund, KLP has beaten benchmark in five out of seven years. KLP uses portfolio strategy to bet on stock with lower volatility than the benchmark.

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