Norway’s sovereign wealth fund has now recouped all of the huge investment losses suffered earlier this year, with its portfolio having returned to end-2019 levels – as measured in the basket of international currencies it uses for formal reporting.
Performance of the fund’s assets in the last six weeks has closed the 3.4% investment loss stated in the Government Pension Fund Global’s (GPFG) interim report for the first half of this year, which was released today, journalists at this morning’s news conference in Oslo heard.
Trond Grande, deputy chief executive officer of Norges Bank Investment Management (NBIM), the central bank operation running the oil fund, said: “The markets performed well during the summer, particularly the equity markets, and we’ve seen falling interest rates so there’s some uplift on the bonds as well.
“So the fund is now basically zero, maybe a little bit plus for the year as a whole,” he said.
In results for January to June, the fund reported a 6.8% loss on its equity investments – which made up 69.6% of the fund at the end of June – but a 5.1% gain on fixed income investments, whose allocation stood at 27.6%.
NBIM said in the report that its bond portfolio has been boosted by lower interest rates.
“The coronavirus pandemic led to global monetary easing, with rate cuts and active use of central bank balance sheets,” it said.
Investments in unlisted real estate lost 1.6% in the six-month period, with that asset class making up 2.8% of the fund’s portfolio at the end of June.
NBIM underperformed its benchmark in the period, with the fund’s overall return 11 basis points lower than the return on the benchmark index, according to the report.
In 2020, the Norwegian government began withdrawing money from the fund for the first time since 2017, taking out NOK167bn in the period – more than it has yet withdrawn in any single year, as the country’s state finances came under pressure as a result of the coronavirus pandemic as well as falling oil prices.
However, the weakening of the Norwegian krone on foreign exchanges resulted in a NOK672bn gain for the fund between January and June.
Mainly because of this, the fund’s value grew to NOK10.4bn at the end of June from NOK10.1bn at the end of last year, in spite of the 3.4% loss as measured in the basket of currencies NBIM uses for reporting.
Looking ahead, Grande said that even though markets had recovered well in the second quarter, there was still considerable uncertainty for investors, with the pandemic being the main factor behind this.
“It is still a global pandemic and it doesn’t seem to be under control in any shape or form – the development of a vaccine has not yet come to fruition,” he said at the news conference.