Public Equities Propel 10% 1H Return for Norway’s Sovereign Wealth Fund

Strong equity gains helped propel Norway’s Government Pension Fund Global to a 10% return in the first half of 2023 to raise the sovereign wealth fund’s total market value to 15.3 trillion kroner (approximately $1.433 trillion).

Despite the robust return, the pension giant fell short of its benchmark’s return by 23 basis points.

After a weak 2022 (-14.1% overall return), the fund’s return on equity investments was 13.7% during the first half of this year, while its fixed-income investments returned 2.2%. Unlisted renewable energy infrastructure investments lost 6.5%, and unlisted real estate decreased 4.6%.

“The stock market has been very strong in the first half of the year, following a weak year in 2022,” Norges Bank Investment Management CEO Nicolai Tangen said in a release. “Especially technology stocks have seen significant growth, largely driven by the increased demand for new solutions in artificial intelligence.”

As of the end of June, the GPFG portfolio’s asset allocation was 71.3% equities, 26.4% fixed income, 2.3% unlisted real estate and 0.1% unlisted renewable energy infrastructure.

The strongest returns within the pension fund’s equity portfolio in the first half of the year came from technology, consumer discretionary and industrial stocks, while energy had the weakest return. Tech firms returned 38.6%, which the pension fund attributed to strong demand for new AI solutions from the biggest internet, software and semiconductor companies.

Consumer discretionary was the second-strongest sector, returning 20.7%, as consumption and economic activity maintained their levels despite rising prices and interest rates. The pension fund also noted that the lifting of pandemic restrictions in China led to further optimism, especially among luxury goods stocks.

Industrials were the third-best performing sector with a 15% return, as strong growth in orders and increased demand outweighed recession fears. Energy companies returned only 0.4%, as prices for oil, gas and refined products fell back from their high levels of last year.

According to the pension fund, the main driver behind the losses to its unlisted real estate investments was the office sector, with U.S. investments in particular falling sharply during the first half; the U.S. office sector also negatively affected the Government Pension Fund Global’s listed portfolio.