Norway’s sovereign wealth fund loses $174 billion in first half

Norway’s central financial institution, often known as Norges Bank, in Oslo, Norway.

Kristian Helgesen/Bloomberg | Bloomberg | Getty Images

Norway’s sovereign wealth fund, the biggest in the world, had a lack of 1.68 trillion Norwegian kroner ($174 billion) in the first half of 2022, as shares markets extra broadly noticed a tumultuous six months.

The $1.3 trillion fund returned a detrimental 14.4% through the interval, as shares and bonds reacted violently to world recession fears and skyrocketing inflation. But the fund’s return was 1.14 foundation factors higher than the return of the benchmark index, the nation’s Norges Bank stated Wednesday, equal to 156 billion kroner.

“The market has been characterised by rising interest rates, high inflation, and war in Europe. Equity investments are down with as much as 17 percent. Technology stocks have done particularly poorly with a return of -28 percent,” the CEO of Norges Bank Investment Management, Nicolai Tangen, stated in a launch.

The fund’s return on fairness investments slipped 17%, whereas fastened earnings investments and unlisted renewable power infrastructure have been down 9.3% and 13.3%, respectively. 

Norway’s huge North Sea oil and fuel reserves are the bedrock of the fund’s wealth. Energy was the one sector to not see detrimental returns after the fund made big investments in wind energy in current years.

“In the first half of the year, the energy sector returned 13 percent. We have seen sharp price increases for oil, gas, and refined products,” Tangen added.

NBIM’s (Norges Bank Investment Management) efficiency is “symptomatic” of a bigger development throughout most main funding funds, Economist Intelligence Unit analyst Matthew Oxenford informed CNBC.

“The first half of 2022 saw significant upheaval in financial markets globally, and most diversified funds have seen declines in their value,” Oxenford stated.

“Globally, much of this decline was driven by aggressive monetary tightening by central banks, which led to a sharp decline in investment in fast-growing firms in high-growth sectors such as tech (with Meta being the largest single source of loss in NBIM’s portfolio) as the return on safer investments increased and the global pool of high-risk investment shrinks,” he stated.

The loss coincides with the U.S. inventory market experiencing its worst first half for the reason that Nineteen Seventies.

The fund will make it out of the opposite aspect of its monetary straits although, Oxenford stated.

“Given that NBIM is highly diversified, and pursuing a longer-term investment strategy, it is likely to weather this storm, although the exceptionally high growth rates we’ve seen in 2020 and 2021 are unlikely to return as global central bank interest rates aren’t likely to return to the pandemic-era near-zero levels any time soon,” he stated.

Inflation, rate of interest hikes and battle in Europe significantly dented the most important U.S. indexes, with the Dow Jones Industrial Average dropping greater than 15% in the first six months of the 12 months, the S&P 500 down over 20% and the Nasdaq Composite falling virtually 30%.

Correction: Norway’s sovereign wealth fund had a lack of 1.68 trillion Norwegian kroner in the first half of 2022. An earlier model misstated the determine.


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