World’s largest sovereign wealth fund reports $21 billion loss after ‘volatile’ first half of the year

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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 in a statement.

The fund’s total market value at the end of the six months was 10.4 trillion kroner.
It had 69.6% invested in equities, 27.6% in fixed income and 2.8% in unlisted real estate.

Norway’s huge pension fund — the largest sovereign wealth fund in the world — reported negative returns for the first half of the year on Tuesday, citing “major fluctuations” in equity markets.

The Government Pension Fund Global said it returned -3.4% for the first six months of 2020, equivalent to -188 billion kroner (-$21.3 billion).

“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 in a statement.

“However, the sharp stock market decline of the first quarter was limited by a massive monetary and financial policy response.”

The fund’s total market value at the end of the six months was 10.4 trillion kroner, with 69.6% invested in equities, 27.6% in fixed income and 2.8% in unlisted real estate.

Its equity investments fell -6.8% and its real estate returned -1.6% over the first half, although its fixed-income investments rose by 5.1%.

According to the Sovereign Wealth Fund Institute, Norway has the largest wealth fund in the world, when ranked by total assets, followed by the China Investment Corporation and Abu Dhabi Investment Authority.

The fund, which saves revenue from the oil and gas industry, is worth roughly three times Norway’s annual gross domestic product and is pivotal to the Nordic country’s finances.

Negative returns in most markets

Norway’s central bank, also known as Norges Bank, said in its half-year report the year began “optimistically,” due in part to expectations of healthy growth in the real economy.

However, as the coronavirus outbreak began to spread worldwide, the bull market ended abruptly, and financial markets were hit by a series of liquidity shocks.

To date, more than 21.8 million people have contracted Covid-19, with 774,160 related deaths across the globe, according to data compiled by Johns Hopkins University.

The Norwegian fund said it saw negative returns in most markets through to the end of June, with North America stocks, which accounts for almost 44% of its equity portfolio, slipping 2.6% over the period.

European stocks returned -11.7% for the first half of 2020 and accounted for 31.6% of the fund’s equities.

Stocks in the Asia-Pacific region returned -4.6% and made up 23% of the fund’s equity investments. Meanwhile, emerging markets returned -7.3% and accounted for 11.5% of the portfolio.

Oil and gas stocks were the worst performers for the first half of the year, with a return of -33.1%. “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,” the fund said.

Conversely, tech stocks were the period’s best performers with a positive return of 14.2%. “Strong demand for online solutions for working, education, shopping and entertainment due to the coronavirus pandemic contributed to this strong return,” it added.

Correction: The text of this article has been updated to reflect that the total market value of Norway’s pension fund is 10.4 trillion kroner.

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