Norway’s domestic government pension fund — the smaller counterpart of the NOK6.8trn (€723bn) oil fund — saw an investment loss during the second quarter of 2015 as long bond yields ticked higher for the first time in years.

The NOK196bn Government Pension Fund Norway, which along with the Government Pension Fund Global (GPFG), forms part of the Government Pension Fund, reported a return of 5.5% between January and June this year, but a 0.3% loss for the second quarter on its own.

In absolute terms, the first half profit was NOK10.2bn and the second quarter loss came to NOK503m.

The returns compare to 9.3% for the first half of 2014 and 6.7% for the second quarter of that year.

Olaug Svarva, chief executive of Folketrygdfondet, which manages the fund, said: “After a strong first quarter, market developments were more hesitant in the second quarter.”

The second quarter saw investors focus on uncertainty around Greece’s relationship with the rest of the euro-zone, China’s slowdown in growth and the prospects of the US Federal Reserve lifting interest rates, she said.

Companies exposed to the petroleum sector, which make up a large part of the fund’s equity portfolio, were now undergoing intensive restructuring, Svarva said, adding that this was a challenging period with difficult choices for investors.

The pension fund is split into an equity portfolio and a bond portfolio. 

The equity part posted a 9.4% return in the first half, 0.2% below the benchmark return, while the bond portfolio made a 0.2% return, beating its reference index by 0.4 of a percentage point, Folketrygdfondet said.

In the second quarter alone, the equity portfolio returned 0.1% — half a percentage point below the benchmark, while bonds lost 0.8% — which was a 0.4 point improvement on the benchmark.

“Yields on long-dated government bonds rose in the second quarter after falling for many years,” the fund’s manager said in the interim report.

This rise in yields for bonds with a long time to go to maturity was the reason for loss on the bond portfolio, it said. 

However currency movements had helped trim the loss.

While the Norwegian bond market fell 1.1% in the second quarter measured by the benchmark, and the benchmark for bonds for the whole of the Nordic region fell 1.7%, the decline of the latter had been reduced because of Norwegian krone weakness in the quarter, according to the report.

The fund’s assets grew in value to NOK196bn at the end of June from NOK186bn at the end of December 2014.