Norway’s $1.3 trillion sovereign wealth fund posted its biggest loss on record as rate hikes, surging inflation and Russia’s invasion of Ukraine spurred volatility.
The Oslo-based fund, the world’s biggest, lost 14.4% in the six months through June. The loss of $174 billion was the fund’s biggest ever in currency terms for a half year, it said on Wednesday.
“The market has been characterized by rising interest rates, high inflation, and war in Europe,” chief executive Nicolai Tangen said in the statement. “Technology stocks have done particularly poorly with a return of -28%.”
Tangen told lawmakers in May that greater uncertainty and more risk is the new normal for the world’s biggest owner of publicly traded companies, and it now probably faces the greatest changes in 30 years due to the geopolitical consequences of the war in Ukraine.
In the first half, the fund shed 17% on stocks, where it has the bulk of its investments, and lost 9.3% on fixed income. Energy sector was the only one with a positive return, of 13%, cushioning the blow thanks to sharp price increases for oil, gas and refined products.
Investments in logistics property helped its unlisted real-estate holdings gain 7.1%, though they account for 3% of its assets.
Norway decided on Feb. 27 to drop Russian assets from the fund in response to the country’s invasion of Ukraine, but ran into problems with implementing the decision after Russia banned foreigners from executing trades on its stock markets.
Norges Bank said in March that it will return with a recommendation on lifting a freeze on the fund’s investments in Russia once markets are functioning more normally, along with more detailed recommendations on carrying out the sale.
Created in the 1990s to invest Norway’s oil and gas revenues abroad, the fund has a portfolio of about 9,000 stocks, and delved into renewable infrastructure for the first time last year.
Overall, the fund’s total return in the first half was 1.14 percentage points higher than that of the benchmark against which it measures itself. Equity investments in the US and the UK made the most positive contributions to the relative return, and Chinese stocks the most negative.
“This is the first time in two decades that we have generated an excess return in a sharply falling equity market,” the fund said. “We do not expect a similarly strong relative return in the future.”
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