Norway’s Sovereign Wealth Fund Loses $71 Billion in Q1

Norway’s sovereign wealth fund’s investment portfolio lost 4.9% during the first quarter of 2022—equal to more than $71 billion—as its market value fell to $1.275 trillion, due to market volatility caused by political turmoil around the globe. [Source]

“The first quarter has been characterized by geopolitical turbulence, which has also affected the markets,” Norges Bank Investment Management Deputy CEO Trond Grande said in a statement. NBIM is the arm of the Norwegian central bank that operates the fund. “The return was negative for both equities and fixed income, but positive for unlisted real state.” [Source]

The fund’s equity investments declined 5.2% during the quarter, and its fixed-income investments provided no hedge, losing 4.8% for the period. Unlisted renewable energy infrastructure investments also weighed down the fund, dropping 3.3% during the first three months of the year. Unlisted real estate investments, the lone bright spot for the fund, gained 4.1% during the quarter; however, they only account for 2.7% of the portfolio.

The fund said the krone strengthened against several major currencies during the quarter, and that currency movements contributed to a 171 billion kroner decrease in the fund’s value, while inflow into the fund totaled 141 billion kroner. As of March 31, 70.9% of the fund was invested in equities, 26.3% in fixed income, 2.7% in unlisted real estate, and 0.1% in unlisted renewable energy infrastructure.

Despite the rough quarter, the fund managed to beat its benchmark index’s return by 0.66 percentage points, or 82 billion kroner. The fund’s investments are measured against a benchmark index set by Norway’s Ministry of Finance on the basis of FTSE Group indices and Bloomberg Fixed Income indices.

The results for the quarter were a sharp U-turn from the previous quarter, when the fund returned 4.59%, as well as from the quarter a year ago when the fund returned 4.02%. As of the end of March, the fund had annualized returns of 8.41% over the past 10 years, and 6.33% since its inception at the beginning of 1998.

The fund giant owns equity stakes in more than 9,000 companies worldwide, and on average, holds approximately 1.3% of all listed companies in the world. Meanwhile, its fixed-income investments are allocated bonds issued by governments and related institutions and securities issued by companies. Up to 30% of the fund can be invested in fixed income.