Norway Sovereign Wealth Fund Loses $173 Billion in the First Half of 2022
Posted on 08/17/2022
Norway Government Pension Fund Global, the country’s sovereign wealth fund, returned -14.4%, and equivalent to -1,680 billion kroner (US$ 173 billion) in the first half of 2022. The wealth fund is heavily invested in stocks. The sovereign wealth fund had a value of 11,657 billion kroner as at June 30, 2022. 68.5 percent of the fund was invested in equities, 28.3 percent in fixed income, 3.0 percent in unlisted real estate, and 0.1 percent in unlisted renewable energy infrastructure. The SWF rode the QE waves, as it leaned heavily into stocks, seeing massive gains over the past decade.
The return on the fund’s equity investments was -17.0%, the return on the fixed income investments was -9.3%, whereas investments in unlisted real estate returned 7.1%. The return on unlisted renewable energy infrastructure was -13.3%. All sectors have seen negative returns, with the exception of energy.
“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”, says CEO of Norges Bank Investment Management Nicolai Tangen in a press release.
Stranded legacy oil and gas investments outperformed the tech sector in equities. Prices for oil, gas, and refined products rose sharply as a result of stronger demand and low investment levels. The war between Russia and Ukraine put further pressure on prices.
For equities, the energy sector returned 13.2% for the first half of 2022 with 4 billion krone holdings versus -27.6% in the tech sector with 18.7 billion krone in holdings. At June 30, 2022, the top four equity holdings of the SWF are Apple Inc, Microsoft Corporation, Alphabet Inc US, and Amazon.com, Inc.
“In the first half of the year, the energy sector returned 13%. We have seen sharp price increases for oil, gas, and refined products”, Tangen says.
Hammering in Fixed Income
The sovereign investor got hammered in its fixed income portfolio, with corporate bonds providing a -11% return for the first half of 2022, government-related bonds at -11.3%, government bonds at -9%, inflation-linked bonds at -10.1%, and securitized bonds at -9.3%. The sovereign fund’s three largest bond holdings were of U.S., Japanese, and German government bonds. U.S. Treasuries accounted for 25.9% of fixed income investments and returned -5.1%, while Japanese government bonds made up 10.3% of fixed-income investments and returned -14.0%, and euro-denominated government bonds amounted to 8.9% of fixed income investments and returned -15.5%.
Last, the krone depreciated against several of the main currencies during the quarter. The currency movements contributed to an increase in the fund’s value of 642 billion kroner. In the first half of the year, inflow into the fund amounted to 356 billion kroner.