Inflation and war in Europe drive record first-half losses at Norway oil fund

Norway’s $1.3 tn Government Pension Fund Global – the world’s largest sovereign wealth fund (SWF) – reported a record loss of 1.68 bn kroner ($174 bn), as its return on investment for the first half of 2022 was -14.4 percent.

Despite the record loss, the fund – widely dubbed the Norwegian oil fund – still beat its benchmark index by 1.14 percent, the equivalent of 156 bn kroner.

On average, the fund holds 1.3 percent of all the world’s listed companies but its return on investment in equities hit -17 percent, according to Norges Bank Investment Management (NBIM), which oversees the SWF. It says that all sectors – with the exception of energy – saw negative returns over the first six months of the year. This negative return on equities was the highest across all areas of investment by the SWF.

‘The market has been characterized by rising interest rates, high inflation, and war in Europe,’ says Nicolai Tangen, CEO of NBIM, in a statement published alongside the fund’s half-year results.

‘Equity investments are down by as much as 17 percent. Technology stocks have done particularly poorly with a return of -28 percent,’ he adds. The picture is vastly different for energy stocks, however. ‘In the first half of the year, the energy sector returned 13 percent. We have seen sharp price increases for oil, gas and refined products,’ explains Tangen.

As of 30 June, 2022, more than two thirds of the fund (68.5 percent) was invested in equities, 28.3 percent in fixed income, 3 percent in unlisted real estate – which saw a positive return on investment of 7.1 percent over the first six months of the year – and 0.1 percent in unlisted renewable energy infrastructure.