Norway’s sovereign wealth fund saw its value decline by NOK53bn (€6bn) over the course of the second quarter, as the kroner strengthened and US equity holdings suffered negative returns.
Yngve Slyngstad, chief executive of Norges Bank Investment Management, in charge of the NOK6.9trn Government Pension Fund Global, said fixed income returns were impacted by a rise in yields across its main markets as he announced overall returns of -0.9%, ahead of its benchmark.
Fixed income accounted for over a third of assets at the end of June and returned -2.2%, as only securitised debt seeing a positive return.
Both euro-denominated bonds and US Treasuries saw negative returns, and the overall basket of government bonds returned -2.9%, on par with the returns from corporate bond holdings.
Asian equity holdings boosted the fund’s overall equity returns to -0.2%, despite North American holdings returning -1.4%.
The fund singled out Chinese, Japanese and UK equities for praise, as Chinese holdings were the strongest performer over the second quarter, returning 9.2%.
Japanese equities returned 2.3%, well above the 1% average achieved by all holdings in Asia, and UK stocks returned 3.3%.
Only a small number of equity sectors saw positive returns – among them financial stocks, heathcare and telecoms, latter which the fund said was boosted by the potential for mergers in both the US and Europe.
Oil and gas stocks returned 1.1%, boosted by a combination of a recovering oil prices and companies implementing cost-cutting measures.
“The return was also boosted by expectations of lower capital expenditure and so stronger cash flow ahead,” the quarterly report noted.
The fund’s 2.7% property portfolio saw positive returns, as unlisted holdings worth NOK142bn saw returns of 4.4% compared to losses of 5.5% from its listed real estate portfolio.
The sovereign fund grew its real estate holdings over the quarter with two acquisitions.