NORWAY - Equity losses of 4% have resulted in the Norwegian Pension Fund Global seeing investments return -2.2% over the second quarter, although actual declines in the oil fund's value were offset by a weakening kroner in the same period.
Financial stocks - comprising more than a fifth of the fund's equity portfolio - and holdings in oil and gas-related companies were particularly affected between April and June.
Norges Bank Investment Management (NBIM) noted that crude oil prices dropped by 20%, thereby leading to -7.8% returns across the sector.
Bank holdings fared marginally better, returning -6.1%, while basic materials lost nearly 10% in value over the three months.
However, when broken down by region, European banking stocks declined by 8.5% in value, with Norges citing Cyprus and Spain's request for financial assistance as a reason for the fall.
Yngve Slyngstad, chief executive at NBIM, said the weaker-than-expected global economy "weighed on stock markets" over the period.
"There was also increased uncertainty about the repercussions of the European sovereign debt crisis," it said.
The quarter saw the NOK3.6trn (€477bn) fund rebalance its fixed income exposure, further implementing a shift in asset allocation away from Europe first announced in February.
US Treasury bonds - at 21.1% of fixed income holdings, the fund's largest single investment - helped boost sovereign debt returns.
T-bills returned 3.3%, while UK gilts returned 5.1% and euro-denominated debt netted the fund 0.8%.
Following last quarter's decision to sell Irish and Portuguese debt, it also reduced exposure to French, Spanish and UK sovereign bonds, while increasing by 0.6% percentage points its fixed income holdings denominated in emerging market currencies.
"A lower exposure than the benchmark to Italian and Spanish government bonds contributed positively to the relative return," the quarterly report added.
However, it also highlighted that the emerging market holdings had contributed to a 0.17 percentage point benchmark underperformance for the overall portfolio.
NBIM also confirmed that it had bought an undisclosed amount of shares in Formula One, which has plans to list in Singapore in the near future.
However, despite investment losses of NOK77bn, the fund's total assets under management increased NOK65bn at the end of June.
"A weakening of the kroner against several major currencies boosted the market value by NOK70bn," NBIM said, adding that it received an additional NOK72bn in revenue from the government, of which 80% had been invested in equity.