The world’s largest sovereign wealth fund suffered the highest losses in its history in the first half of 2022. Norway’s oil fund, whose equity holdings are equivalent to 1.5% of the global stock market, has become so large that it has become a quasi-index fund, largely reflecting the dynamics of that market.
The latter rose strongly last year thanks to the ultra-loose monetary policies of central banks and the reopening of economies after the pandemic, bringing the Norwegian fund a 14.5% return. However, in January-June this year, the market fell on concerns about high inflation, a possible recession and rising interest rates.
The fund, which has $1.2 trillion in assets, suffered a 14.4% loss in the first half, or $174 billion. The record dollar losses were driven by a sell-off in every sector except energy, the fund said Wednesday. Nikolai Tangen, CEO of Norges Bank Investment Management (NBIM), the fund’s management company, said at a press conference:
What was unusual this time was that the fund lost money on both stocks and bonds, Tangen added. Losses on the equity portfolio were particularly large – 17%, and on fixed income instruments – 9.3%. The biggest contributor to NBIM’s stock market losses was shares of Meta, Facebook’s parent company, which fell 52%.
Real estate investments returned 7.1%, but they accounted for only 3% of the fund’s assets. Investments in renewable energy infrastructure resulted in a loss of 13.3%.
“The main factors that determined the dynamics of the market were rising interest rates, high inflation and the war in Europe. Technology stocks performed particularly poorly, losing 28%,” Tangen said in the report.
Meanwhile, investments in the energy sector brought in 13% income in the first half of the year thanks to a sharp rise in prices for oil, gas and petroleum products.