Norway’s $1 trillion sovereign-wealth fund is set to slash its holdings of emerging-market bonds, a move closely watched by other investors given the fund’s massive size.
After a year of consultation, the Ministry of Finance said Friday that major emerging markets would be removed from the fund’s fixed-income benchmark, which covers both corporate and government debt. Among the emerging markets removed from the index are Chile, Mexico, Russia, South Korea and Thailand.
The move, analysts said, reflects the rising correlation between bonds in emerging and developed markets, while the fund’s growing equities portfolio exposes the fund to emerging market currencies.
There are significant transaction costs involved in holding emerging-market debt as part of the benchmark, finance ministry officials added.
An expanded version of this story appears on WSJ.com.
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