Norway’s giant sovereign wealth fund saw higher returns from securities lending and repo trades in 2016.
The Government Pension Fund Global (GPFG) reported "secured funding" revenue of 4.013 billion kroner (US$473m) in its annual report this week.
The total, which includes earnings from securities lending agreements, repurchase agreements and equity swaps, was 24% higher than 2015.
Both bonds and equities are lent through the fund’s securities lending program.
Bond lending increased to 49% of the total securities lending at the end of 2016, up from 30% at year-end 2015.
Norges Bank Investment Management (NGIM) runs the fund and appointed Citi as its global custody and securities lending agent in 2014.
Last year NGIM’s experts sent out a note on securities lending, criticising dividend arbitrage strategies in programs.
They added that a well-thought-out regulatory environment rather than ad-hoc intervention is crucial for the securities lending market.
In addition, NGIM called on intermediaries, whether prime brokerages or agents such as custodians, to focus on providing increased transparency into the securities lending market.
Overall, Norway's GPFG returned 6.9%, or 447 billion kroner (US$52.6bn), in 2016 - up from 2.7% return in 2015.
Equity investments returned 8.7%, while fixed-income investments returned 4.3%.
Investments in real estate returned 0.8%.