The world’s biggest sovereign wealth fund has issued a resounding vote of confidence in the UK economy and the long-term prospects for the pound, raising its target for sterling bonds to 8pc of its global benchmark fund. Norway’s $1 trillion oil fund has advised its government to concentrate core holdings of debt into dollars, euros, and sterling, dropping Japanese and emerging market bonds altogether. “This is a very significant move. It is extraordinary that they have opted for the UK as world number three for investment ahead of China and Japan,” said Stephen Jen, a currency expert at EurizonSLJ Capital and an advisor to Asian sovereign wealth funds. The shift in strategy came as the vast Norwegian fund – now known as the Government Pension Fund – said it is stepping up its expansion into London commercial property, buying a £112m stake in 20 Air Street in Soho from Crown Estate. It purchased stakes on Oxford Street and Princes Street in May, and bought London developments from Great Portland Estates and Aberdeen Asset Management last year after the Brexit vote. “They are thinking long-term and buying prime assets at a 20pc currency discount. We foreigners are not as bearish about the UK as a lot of British analysts seem to be,” said Mr Jen.
Norway's $1tn Government Pension Fund has stunned experts by advising its government to concentrate all debt holdings on the dollar, euro and sterling, cutting out the likes of China, Australia and Japan. The fund has also ramped up its acquisitions of London property, most recently with the £112m ($145m) purchase of Air Street in Soho. While the fund has not revealed its exact reasons for choosing the three Western currencies, it is thought Japan's growing economy and fears of a crisis in the government bond market prompted the move.