Norway’s huge sovereign wealth fund, the world’s biggest, lost 188 billion kroner (US$21 billion) in the first half of the year as the global economy reels from the COVID-19 pandemic, the central bank said Tuesday.
The fund, in which the Norwegian state’s oil revenues are invested, was hit by plummeting share prices, with stocks accounting for 69.6 percent of its investments.
Its share portfolio posted a negative return of 6.8 percent in the first six months of the year.
At the end of June, the fund was valued at 10.4 trillion kroner (989 billion euros), up from the 9.98 trillion kroner seen at the end of the first quarter.
Since 1998 the fund has generated an annual return of 5.8 percent, or 5,170 billion kroner.
The aim of the oil fund is to ensure responsible and long-term management of revenue from Norway’s oil and gas resources in the North Sea so that this wealth benefits both current and future generations. The fund’s formal name is the Government Pension Fund Global.
“The year started with optimism, but the outlook of the equity market quickly turned when the coronavirus started to spread globally,” the fund’s deputy chief executive, Trond Grande, said in a statement.
“However, the sharp stock market decline of the first quarter was limited by a massive monetary and financial policy response,” he added.
“Even though markets recovered well in the second quarter, we are still witnessing considerable uncertainty”, Grande said.
Real estate investments, which represent 2.8 percent of the portfolio, also posted a negative return, of 1.6 percent, while bond investments, which account for 27.6 percent of assets, posted a gain of 5.1 percent.
“Even though markets recovered well in the second quarter, we are still witnessing considerable uncertainty,” Grande said.
The fund is meanwhile still mired in controversy over the appointment of a new chief executive.
Nicolai Tangen, a billionaire who founded the AKO Capital hedge fund in London, is due to take over the fund on September 1, replacing Yngve Slyngstad who is retiring.
But critics have complained about Tangen’s possible conflicts of interest, as well as his use of tax havens.
The central bank has meanwhile been criticised for irregularities in the recruitment process.
As a result, some major political parties are opposed to Tangen’s appointment, and it remains up in the air.
HOW THE FUND IS INVESTED
The fund says it has a small stake in more than 9,000 companies worldwide, including companies like Apple, Nestlé, Microsoft and Samsung. On average, the fund holds 1.5 percent of all of the world’s listed companies.
The Norwegian oil fund is one of the world’s largest funds with investments in some 74 countries globally. The fund says that these investments are spread across these markets and currencies to achieve broad exposure to global growth and value creation, and ensure good risk diversification.
Most of the fund is invested in equities, while another part is invested in bonds, which are a type of loan to governments and companies, and a final slice is invested in real estate, the fund says.
The fund had a value of 10,400 billion kroner as at 30 June 2020, of which 69.6 percent was invested in equities, 2.8 percent in unlisted real estate, and 27.6 percent in fixed income.