Norway’s sovereign wealth fund returned 1.3% during the second quarter of the year, as European equity markets slumped in the wake of the UK’s decision to leave the European Union.

The NOK7.2trn (€NOK769bn) Government Pension Fund Global said fixed income was the strongest-performing asset class in the three months to June, largely due to interest rate cuts by central banks, returning 2.5%.

Equity holdings fared less well, returning 0.7% overall, as financial stocks, consumer services and the technology sector – accounting for over 40% of the fund’s equity portfolio – all incurred losses, as did the fund’s property portfolio.

Trond Grade, deputy chief executive of manager Norges Bank Investment Management, noted the gains seen within the fund’s fixed income portfolio would not translate to sustained returns in the longer term, and noted the relative market instability brought on by Brexit.

“After a period of relatively stable markets at the beginning of the quarter, the British decision to leave the EU sparked a sharp decline in Europe.

“Markets recovered relatively quickly,” he continued, “but with major variations between sectors. Financials, for example, performed weakly.”

European stocks, which accounted for 37.2% of the fund’s NOK4.2trn equity portfolio, lost 3% over the course of the second quarter, while UK stocks fell 3.6%.

Despite the European volatility, stocks listed elsewhere performed well, with a 3.3% return from US equities – a market accounting for nearly as large a percentage of the fund’s portfolio as its total exposure to European equity.

Asia and Oceana returned 1.8%, while Japan – which accounts for 9% of equity holdings – returned 2.1%.

Even with European stock volatility, the continent was home to both the fund’s strongest performing shareholdings, and the largest IPO in which NBIM participated last quarter.

Shell, which is the sovereign fund’s second-largest holding, with shares worth NOK41bn, outperformed pharmaceutical Novartis and fellow oil company ExxonMobil, ranked second and third.

The listing of Dong Energy, which resulted in a DKK4bn (€537m) profit for Danish pension fund ATP, was the quarter’s largest IPO.

NBIM also noted a dramatic increase in negatively yielding government bonds within its portfolio, with German 10-year Bund yields falling below zero towards the end of June.

It said that at the end of June, nearly a quarter of its government debt had negative yields, up from below 5% a year ago and none in June 2014.