Norway’s sovereign wealth fund, built on the back of the country’s oil wealth and the biggest in the world, reported its first quarterly loss in two years for January to March on the back of a global stock selloff that it had no means of avoiding as more than two-thirds of its holdings are in stocks.
Commenting on the results, the chief executive of the fund, Yngve Slyngstad said, “The most important expression of risk in the fund is that the strategic equity share is set to 70 percent. This means that fluctuations in the fund’s value are predominantly determined by the development in global stock markets.”
The Norway Government Pension Fund Global booked negative returns of 1.5 percent for the first quarter of the year, or a loss of US$15.1 billion (171 billion kroner). In stocks, the return was -2.2 percent, but in unlisted real estate investments there was a positive return of 2.5 percent. The real estate holdings of the fund, however, are just 2.7 percent, so that positive result had no bearing whatsoever on the overall performance of the fund. The rest of its holdings, at 31.2 percent, are in bonds.
Like other investment vehicles, the Norway fund suffered the effects from growing unease about protectionist policies in the United States combined with rising wages and expectations for more interest rate hikes. U.S. stocks comprise 36.1 percent of the fund’s stock portfolio and represent its single largest market. The largest equity holdings are in the tech sector, including Microsoft, Apple, and Alphabet, as well as Nestle.
Last month, the fund warned it could lose US$420 billion from its value—40 percent—this year if the market crashes and the Norwegian krone strengthens. “[Our estimate] is much larger than the numbers that have been discussed in Norway on the spending rule [that a government cannot use more than 3 per cent of the fund], and what would be the game plan in case the fund were reduced in krone rapidly,” Slyngstad told the FT at the time.
By Irina Slav for Oilprice.com
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