Norway’s hulking sovereign wealth fund (SWF) this morning revealed its year-to-date investment return is back in positive territory, reporting third-quarter results that were nevertheless weaker than the benchmark its manager is tasked with following.

The Government Pension Fund Global (GPFG) made a 4.3% return on its investments between July and September, measured in the basket of currencies Norges Bank Investment Management (NBIM) uses for reporting.

That return equated to NOK412bn (€37.5bn), NBIM reported, and brought the total return for 2020 so far to NOK224bn, according to the results presentation.

Nicolai Tangen, chief executive officer of NBIM, said: “The financial markets were still influenced by uncertainty related to the coronavirus.

“Regardless, equity markets returned well, mostly due to strong performance in the technology sector in the US,” said Tangen, who took over from outgoing CEO Yngve Slyngstad at the beginning of September.

The return on the fund’s equity investments was 5.7%, with investments in unlisted real estate generating a 0.9% return. Fixed income investments – the fund’s other asset class – produced a return of 1.1%, NBIM reported.

“The fund’s overall return was three basis points lower than the return on the benchmark index,” the central bank department said.

The value of the GPFG grew to NOK10.6trn at the end of September from NOK10.4trn at the end of the first half.

Even though the value of the GPFG’s assets – all of which are foreign - was hard hit in the first quarter by the COVID-19 crisis, the simultaneous weakness of the Norwegian krone had the effect of masking those investment losses at the time.

However in the third quarter, the Norwegian krone strengthened against several of the main currencies, and NBIM said that foreign exchange movements contributed to an NOK97bn decrease in the fund’s value in the three-month period.

The value of the GPFG was also reduced in Q3 by the government’s withdrawal of NOK105bn from the fund, the manager reported.

The Norwegian government stepped up its use of GPFG money this year because of the pandemic, and plans to withdraw NOK404.3bn overall in 2020, well above the NOK252bn it took from the SWF in 2019.

By 30 September, NBIM reported that the GPFG’s equities allocation had risen to 70.7% from 69.6% at the end of June.

The allocation to unlisted real estate dipped to 2.7% of the fund from 2.8% three months before, and the fixed income allocation shrank to 26.6% from 27.6%, according to the interim data.

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