Established in 1996, the sovereign wealth fund invests the income from the Norwegian oil and gas sector.
(Photo: dpa)
Stockholm Fear of war and fears of inflation and recession have hit the world’s largest sovereign wealth fund hard. The Norwegian oil fund posted a record loss of almost 1.7 trillion crowns (170 billion euros) in the first half of the year. This corresponds to a minus of 14.4 percent.
Founded in 1996, the head of the fund, Nicolai Tanger, said: “The loss is the highest we have had in kronor since the fund was launched.” However, he emphasized that the oil fund has outperformed its benchmark index by 1.14 percentage points. At the end of last year, the fund managed 12,340 billion crowns, at the end of June it was only 11,657 billion.
“The market was characterized by rising interest rates, high inflation and war in Europe,” said Tangen. The biggest losses came from investments in shares. The minus in the first six months was 17 percent. Above all, it was investments in technology stocks such as Alphabet, Apple and Meta that had a particularly strong impact on results.
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The minus in this sector was 28 percent. The fund recorded the largest losses with a minus of 38 trillion crowns in its stake in Meta, followed by Amazon (-35 percent) and Apple (-30 percent). On the other hand, investments in companies in the energy sector developed positively: the fund recorded a plus of 13 percent in them.
Many of the technology stocks have turned positive again since the end of June, so that some of the losses could be compensated for. Investments in government bonds fell by 9.3 percent and real estate by 7.1 percent.
Norwegian government changes investment strategy
At the end of June, the total equity share was 68.5 percent of the capital. Bonds accounted for 28.3 percent and real estate for three percent. Due to the difficult economic and political environment, the fund has slightly reduced its equity allocation, while investments in bonds have been slightly increased.
Since the fund is not allowed to invest domestically in order to avoid overheating of the national economy, most of the holdings are listed in euros and dollars. Overall, the fund holds 1.3 percent of all shares issued in the world. He has interests in 9338 companies in 70 countries.
The investment strategy is based on the requirements of the Norwegian government. In 2019, the fund received permission to increase its investments in equities by ten percentage points to 70 percent. 25 percent may be invested in government bonds, five percent in real estate.
The government also decided that the fund should gradually withdraw from the coal sector. The fund managers have already started to do this – but not comprehensively enough in the eyes of environmental protection organizations.
The Oil Fund was set up in 1996 to continue funding the welfare state after oil and gas had dried up. State revenues from the country’s oil business flow into the fund. The oil fund is not only used for social security, but is also intended to keep the national budget in balance.
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