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Cutting back Israeli portfolio over Gaza, West Bank

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Fund sold stakes in 11 of 61 Israeli firms in recent days

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Review started due to investment in jet engine group Bet

Shemesh

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Fund's first-half profit $68 billion

By Gwladys Fouche

ARENDAL, Norway, Aug 12 (Reuters) -

Norway's $2 trillion sovereign wealth fund, the world's

largest, said on Tuesday it expects to divest from more Israeli

companies as part of its

ongoing review of investments

in the country over the situation in Gaza and the West

Bank.

The fund announced on Monday it was

terminating contracts

with external asset managers handling some of its Israeli

investments and has divested parts of its portfolio in the

country over the worsening humanitarian crisis in Gaza.

The review began last week following media reports that the

fund had built a stake of just over 2% in an Israeli jet engine

group that provides services to Israel's armed forces, including

the maintenance of fighter jets.

The stake in the company, Bet Shemesh Engines Ltd (BSEL)

, has now been sold, the fund announced on Tuesday.

Bet Shemesh did not respond to requests for comment.

Norges Bank Investment Management (NBIM), an arm of

Norway's central bank, which held stakes in 61 Israeli companies

as of June 30, in recent days divested stakes in 11 firms,

including BSEL. It did not name the other companies.

"We expect to divest from more companies, NBIM CEO Nicolai

Tangen told a press conference on Tuesday.

The fund began investing in BSEL in November 2023, about

one month after

the war in Gaza

began, via an external investment manager, Tangen said. The

fund declined to name the external portfolio manager.

Since then, NBIM has held quarterly meetings with Bet

Shemesh Holdings, but the war in Gaza was not raised as a theme.

"We had discussions about their business in the United

States, not about the war in Gaza," Tangen said, adding that the

fund had rated BSEL as a "medium risk" stock with regards to

ethics concerns.

BSEL was later reviewed as a high-risk stock in May. That

change should have been quicker, Tangen said, adding that NBIM

should have had a tighter overview of these investments earlier.

"We should have been quicker in taking back control of the

Israeli investments," he said.

SIX-MONTH PROFIT

The fund, which invests the Norwegian state's revenues from

oil and gas production, is one of the world's largest investors,

owning on average 1.5% of all listed stocks worldwide. It also

invests in bonds, real estate and renewable energy projects.

On Tuesday, it posted a 698 billion Norwegian crowns

($68.28 billion) profit for the first half of the year, earning

an overall return of 5.7% in line with its benchmark index.

"The result is driven by good returns in the stock market,

particularly in the financial sector," Tangen said in a

statement.

($1 = 10.2223 Norwegian crowns)