Norway’s oil fund, as the world’s biggest sovereign wealth fund is commonly known, lost US$21 billion (188 billion Norwegian crowns) in the first half of 2020, as the fund returned a negative 3.4 percent in volatile markets.
The US$1-trillion Government Pension Fund Global, the fund which has amassed wealth from Norway’s petroleum revenues over the past 25 years, saw negative returns from its equity investments—the majority of its investments—in most markets, the fund said in its half-year 2020 report on Tuesday.
The fund’s equity investments returned -6.8 percent, investments in unlisted real estate returned -1.6 percent, while fixed-income investments returned 5.1 percent.
As at the end of June, a total of 69.6 percent of the fund’s value was invested in equities, 2.8 percent in unlisted real estate, and 27.6 percent in fixed income.
“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 Corona virus started to spread globally”, Deputy CEO of Norges Bank Investment Management Trond Grande said.
“Even though markets recovered well in the second quarter, we are still witnessing considerable uncertainty,” Grande noted.
The worst performers among the fund’s equity investments were oil and gas companies, with a return of -33.1 percent.
“This was due mainly to a slide in oil prices in the first quarter as a result of both weak demand on account of the pandemic and an increase in supply from Saudi Arabia. Low gas prices and refining margins also weighed on the sector,” according to the managers of the Norwegian fund.
Among individual stocks, the fund’s investments that made the most negative contributions were in Royal Dutch Shell and in financial services companies HSBC Holdings PLC and JPMorgan Chase & Co.
This year, Norway is set to use a record amount from its fund to counter the economic slump from the COVID-19 pandemic and low oil prices.
The government of Western Europe’s largest oil producer called for using 4.2 percent of the estimated value of the fund at the beginning of this year. Norway has rarely used more than 3 percent of the Government Pension Fund Global.
By Tsvetana Paraskova for Oilprice.com
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