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Norway’s wealth fund loses $174 billion in first half of 2022
Global Banking & Finance Review®
Company
By Victoria Klesty
OSLO (Reuters) – Norway’s sovereign wealth fund, the world’s largest, made a loss of 1.68 trillion Norwegian crowns ($174 billion) in the first half of 2022, it said on Wednesday, as stocks and bonds were hit by global recession fears and rampant price inflation.
The $1.3 trillion fund’s return on investment was a negative 14.4% for the January-June period, although that was 1.14 percentage points ahead of the return on its benchmark index.
“The market has been characterised by rising interest rates, high inflation, and war in Europe,” said Chief Executive Nicolai Tangen of Norges Bank Investment Management, which operates the fund, in a statement.
“Technology stocks have done particularly poorly with a return of minus 28%,” he said.
Founded in 1996, the fund invests revenue from Norway’s oil and gas sector and holds stakes in more than 9,300 companies globally, owning 1.3% of all listed stocks.
Its $1.3 trillion valuation approximately equates to the size of the Mexican economy, the world’s 16th largest, according to some measures.
All sectors in which the fund invests recorded negative returns in the first half, apart from energy, where returns were 13% as prices soared following Russia’s invasion of Ukraine.
Central banks have hiked interest rates aggressively this year to combat inflation, leading to increased borrowing costs and lowered profit margins for corporations.
The tech-heavy Nasdaq Composite and the broader S&P 500 index saw their biggest January-June declines since the financial crisis, while U.S. and European government bond markets had their worst start to any year in decades.
In total, 68.5% of the fund was invested in equities at the end of June, with 28.3% in fixed income, 3.0% in unlisted real estate and 0.1% in unlisted renewable energy infrastructure.
($1 = 9.6716 Norwegian crowns)
(Reporting by Victoria Klesty; Editing by Terje Solsvik and Mark Potter)
A sovereign wealth fund is a state-owned investment fund that invests in various assets, including stocks, bonds, real estate, and other financial instruments, typically funded by revenues from natural resources.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is often measured by the Consumer Price Index (CPI).
A benchmark index is a standard against which the performance of a security, mutual fund, or investment portfolio can be measured. It typically consists of a group of securities that represent a particular market or sector.
Equities represent ownership in a company, typically in the form of stocks. Investors buy equities to gain a share of the company's profits and have a claim on its assets.
Fixed income refers to investments that provide returns in the form of regular, fixed payments, such as bonds. These investments are generally considered lower risk compared to equities.
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