- Norway’s sovereign wealth fund, the largest in the world, suffered a 3.4% drop in the first half of the year, equivalent to around $21 billion.
- Norges Bank Investment Management, which manages the Government Pension Fund Global, said losses were due to “major fluctuations in the equity market.”
- The fund’s equity investments fell in value by 6.8%, but fixed income assets gained 5.1%.
- Oil stocks fared worst, yielding a negative return of around 33%.
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Norway’s sovereign wealth fund, the largest of its kind in the world, posted a loss of $21 billion in the first six months of the year, as the coronavirus pandemic ravaged the country’s portfolio of assets.
In the first half of 2020, the Government Pension Fund Global returned -3.4%, equivalent to a loss of 188 billion kroner ($21 billion).
Norges Bank Investment Management, which manages the wealth fund, said in a statement Tuesday the loss was a result of volatility in stock markets.
Equities have remained extremely volatile in the last few months. The S&P 500 fell to a low of 2237.40 in March as the coronavirus started to shut down economies worldwide. The benchmark index has rallied more than 50% since. Some stocks have remained more sensitive to the pandemic than others, such as those in the energy space.
“There were major fluctuations in the equity market in this period. The year started with optimism, but the outlook of the equity market quickly turned when the coronavirus started to spread globally,” said Trond Grande, deputy CEO of Norges Bank Investment Management.
Grande added: “However, the sharp stock market decline of the first quarter was limited by a massive monetary and financial policy response.”
The value of the fund at the end of the six months was 10.4 trillion kroner ($1.18 trillion). 69.6% of the fund was allocated to equities, while fixed-income represented a 27.6% chunk of the fund.
2.8% came from unlisted real estate investments. The fund owns many well-known commercial properties, including large swathes of central London.
Equity investments in the fund lost 6.8% and unlisted real estate investments lost 1.6%. But the fund’s investments in fixed-income grew by 5.1%.
Norway has the world’s largest sovereign wealth fund. The fund is primarily designed to shield the country from “ups and downs” in revenue from the country’s oil sector, which accounts for much of its economic productivity.
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In May 2018, the fund was worth about $195,000 per Norwegian citizen.
Technology stocks were the fund’s best performers, yielding a return of 14.2%. But oil and gas companies performed the worst with a return of -33.1%.
Oil prices have been very volatile in recent months. Prices took a beating with every major economy placed under lockdown in March, torpedoing demand for fuels.
That combined with the world running out of place to store oil prompted US oil prices to even briefly turn negative in April. Brent prices also toppled, but didn’t turn negative.
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Prices have dramatically recovered since partly due to OPEC production cuts and some reopening of economies, with both benchmarks trading above $42 a barrel.
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