Norway’s sovereign wealth fund, the world’s largest, made a loss of 1.68 trillion kroner (US$173.4 billion) in the first half of this year, the Government Pension Fund of Norway said yesterday, as stocks and bonds were hit by global recession fears and rampant price inflation.
The US$1.3 trillion fund’s return on investment was minus-14.4 percent for the January-to-June period, although that was 1.14 percentage points ahead of the return on its benchmark index.
“The market has been characterized by rising interest rates, high inflation and war in Europe,” Nicolai Tangen, chief executive officer at Norges Bank Investment Management, which operates the fund, said in a statement.
“Technology stocks have done particularly poorly with a return of minus-28 percent,” he said.
Founded in 1996, the fund invests revenue from Norway’s oil and gas sector, and holds stakes in more than 9,300 companies globally, owning 1.3 percent of all listed stocks.
Its US$1.3 trillion valuation approximately equates to the size of the Mexican economy, the world’s 16th largest, according to some measures.
All sectors in which the fund invests recorded negative returns in the first half, apart from energy, where returns were 13 percent as prices soared following Russia’s invasion of Ukraine, cushioning the blow thanks to sharp price increases for oil, gas and refined products.
Central banks this year hiked interest rates aggressively to combat inflation, leading to increased borrowing costs and lowered profit margins for corporations.
The tech-heavy NASDAQ Composite and the broader S&P 500 index saw their biggest January-to-June declines since the 2008 financial crisis, while US and European government bond markets had their worst start to any year in decades.
In total, 68.5 percent of the fund was invested in equities at the end of June, with 28.3 percent in fixed income, 3.0 percent in unlisted real estate and 0.1 percent in unlisted renewable energy infrastructure.
Norway on Feb. 27 dropped Russian assets from the fund in response to Moscow’s invasion of Ukraine, but ran into problems with implementing the step after Russia banned foreigners from executing trades on its stock markets.
Norges Bank in March said it would return with a recommendation on lifting a freeze on the fund’s investments in Russia once markets are functioning more normally, along with more detailed recommendations on carrying out the sale.
Additional reporting by Bloomberg
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