The world’s largest wealth fund’s return on funding was a unfavourable 14.4 p.c for the January-June interval.
Norway’s sovereign wealth fund, the world’s largest, made a report lack of 1.68 trillion Norwegian crowns ($174bn) within the first half of 2022 as shares and bonds had been hit by world recession fears and rampant value inflation.
The $1.3 trillion fund’s return on funding was a unfavourable 14.4 p.c for the January-June interval, which was nonetheless 1.14 share factors forward of the return on its benchmark index.
The decline, led by a 28 p.c plunge within the worth of its know-how shares, was the most important of any six-month interval within the fund’s 26-year historical past, though some losses have since been recovered as markets turned constructive in July and August.
“The market has been characterised by rising rates of interest, excessive inflation, and struggle in Europe,” Chief Govt Nicolai Tangen of Norges Financial institution Funding Administration, which operates the fund, stated in an announcement.
Tangen, who final 12 months delivered the fund’s second highest revenue on report, has repeatedly warned of weak markets forward and that the fund, which is allowed to deviate solely barely from its benchmark indices, would thus additionally decline.
“That is nicely inside what one can anticipate,” Tangen stated of the first-half loss.
The most important loss in its inventory portfolio got here from Fb proprietor Meta Platforms Inc, the place the worth of the fund’s funding declined by 38 billion crowns, adopted by Amazon with 35 billion and Apple with 30 billion.
After surging whereas COVID-19 elevated demand for on-line buying and leisure, tech and social media shares have been hit by greater rates of interest and competitors between platforms for promoting budgets being eaten into by inflation.
Based in 1996, the sovereign wealth fund invests income from Norway’s oil and fuel sector and holds stakes in additional than 9,300 corporations globally, proudly owning 1.3 p.c of all listed shares.
Its $1.3 trillion valuation equates roughly to the scale of the Mexican economic system, the world’s sixteenth largest, based on some measures.
The fund’s greatest share loss got here in 2008 as the worldwide monetary disaster drove down its worth by 23 p.c for the total 12 months, though the scale of the fund was considerably smaller on the time and the general loss amounted to 633 billion crowns.
All sectors through which the fund invests recorded unfavourable returns within the first half, aside from power, the place returns had been 13 p.c as costs soared following Russia’s invasion of Ukraine.
Central banks have hiked rates of interest aggressively this 12 months to fight inflation, resulting in elevated borrowing prices and lowered revenue margins for companies.
The tech-heavy Nasdaq Composite and the broader S&P 500 index noticed their greatest January-June declines for the reason that monetary disaster, whereas US and European authorities bond markets had their worst begin to any 12 months in a long time.
In complete, 68.5 p.c of the fund was invested in equities on the finish of June, with 28.3 p.c in fastened revenue, 3.0 p.c in unlisted actual property and 0.1 p.c in unlisted renewable power infrastructure.