Weak stock markets: Norway's sovereign wealth fund reports billions in losses

Last year, the Norwegian sovereign wealth fund earned more than ever before.

Weak stock markets: Norway's sovereign wealth fund reports billions in losses

Last year, the Norwegian sovereign wealth fund earned more than ever before. Half a year later, a loss in the hundreds of billions was recorded. In the meantime, however, the recovery of the stock markets has cushioned part of the slump.

The Norwegian sovereign wealth fund posted a record loss in the first half of the year due to the weakening stock markets as a result of fears of war, inflation and recession. The minus totaled almost 1.7 trillion Norwegian kroner (around 170 billion euros), as announced by the world's largest sovereign wealth fund in Oslo. The return on capital of the fund, which is equivalent to around 1.3 trillion euros, was minus 14.4 percent from January to June - but it still cut by 1.14 percentage points above the return on its reference index.

"The market was characterized by rising interest rates, high inflation and the war in Europe," said Norges Bank Investment Management chief Nicolai Tangen. Some of the losses - to which above all the 28 percent loss in value in technology stocks contributed - have now been made up for. The reason: The markets turned positive in July and so far also in August.

Tangen, who reported the second-highest gain in the fund's 26-year history in 2021, has repeatedly warned of weak markets. "That's quite within the scope of what can be expected," he said of the minus in the first half of the year. The sovereign wealth fund recorded the biggest loss in its stock portfolio with its shares in Facebook parent company Meta, where the value of the fund investment fell by 38 billion crowns, followed by Amazon with 35 billion and Apple with 30 billion. Tech and social media companies are grappling with higher interest rates and increased competition between platforms for advertising budgets that are being eroded by skyrocketing inflation. Central banks have aggressively raised interest rates in many countries this year to combat inflation. This leads to higher borrowing costs and lower profit margins for companies.

Established in 1996, the sovereign wealth fund invests the income from the Norwegian oil and gas sector. He has interests in more than 9,300 companies worldwide, owning 1.3 percent of all listed shares. Its valuation of €1.3 trillion is roughly the size of Mexico's economy, which was ranked 16th as the world's largest economy according to the latest calculations. About 68.5 percent of the funds were invested in equities, 28.3 percent in fixed-income securities and 3.0 percent in unlisted real estate.