Norwegian flag for the building of the town hall in Oslo.
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Norway’s enormous pension fund – the largest sovereign wealth fund in the world – reported negative returns for the first half of the year on Tuesday, calling “major fluctuations” in the stock markets.
The Government Pension Fund Global said it returned -3.4% for the first six months of 2020, equivalent to -188 billion crowns (- $ 21.3 billion).
“There were major fluctuations in the stock market during this period. The year started with optimism, but the stock market outlook changed quickly as the Corona virus began to spread worldwide,” said Deputy CEO of Norges Bank Investment Management Trond Grande in a statement.
“However, the sharp share of the first quarter stock market was limited by a massive response to monetary and fiscal policy.”
The total market value of the fund 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.
Equity investments fell -6.8% and their real estate -1.6% returned in the first half, although its fixed-income investments increased by 5.1%.
According to the Sovereign Wealth Fund Institute, Norway has the largest wealth fund in the world, as it ranks 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 roughly worth three times Norway’s annual gross domestic product and is important for the Nordic country’s finances.
Negative returns in most markets
The Central Bank of Norway, also known as Norges Bank, said in its half-year report that the year began “optimistically”, due in part to expectations of healthy growth in the real economy.
However, as the outbreak of coronavirus began to spread worldwide, the bull market abruptly collapsed, 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 worldwide, according to data compiled by Johns Hopkins University.
The Norwegian fund said it saw negative returns in most markets until the end of June, with shares in North America accounting for nearly 44% of its equity portfolio, sliding 2.6% over the period.
European equities returned -11.7% for the first half of 2020 and held 31.6% of the fund’s shares.
Shares in the Asia-Pacific region returned -4.6%, making 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 mainly due 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 Saudi Arabia’s supply,” the fund said.
On the contrary, tech stocks were the best performers of the period with a positive return of 14.2%. “Strong demand for online solutions for work, 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 the pension fund of Norway is 10.4 trillion kroner.
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