The central bank of Norway, also known as Norges Bank, in Oslo, Norway.
Kristian Helgesen/Bloomberg | Bloomberg | Getty Images
Norway’s sovereign wealth fund, the world’s largest, posted a loss of 1.68 trillion Norwegian kroner ($174 billion) in the first half of 2022 as stock markets in general experienced a tumultuous six months .
The $1.3 trillion fund returned a negative 14.4% during the period as stocks and bonds reacted violently to fears of a global recession and soaring inflation. But the fund’s performance was 1.14 basis points better than the benchmark’s performance, the country’s Norges Bank said on Wednesday, equivalent to 156 billion crowns.
“The market has been characterized by rising interest rates, high inflation and war in Europe. Equity investments are down as much as 17 percent. Technology stocks have done particularly poorly with a performance of -28 percent,” the CEO of Norges Bank. Investment Management, Nicolai Tangen, said in a statement.
The fund’s return on equity investments fell 17%, while unlisted fixed income and renewable energy infrastructure investments fell 9.3% and 13.3% respectively.
The vast oil and gas reserves of the Norwegian North Sea are the basis of the fund’s wealth. Energy was the only sector that did not post negative returns after the fund made large investments in wind power in recent years.
“In the first half of the year, the energy sector returned 13 percent. We’ve seen a strong increase in oil, gas and refined product prices,” Tangen added.
Norges Bank Investment Management’s (NBIM) performance is “symptomatic” of a larger trend across most major mutual funds, Economist Intelligence Unit analyst Matthew Oxenford told CNBC.
“The first half of 2022 saw significant disruption in financial markets globally, with most diversified funds experiencing a decline in value,” Oxenford said.
“Globally, much of this decline was driven by aggressive monetary tightening by central banks, which led to a sharp decline in investment in fast-growing companies in high-growth sectors such as technology (with Meta is the main source of losses in NBIM).portfolio) as the return on safer investments rose and the overall pool of high-risk investments shrank,” he said.
The loss coincided with the US stock market experiencing its worst first half since the 1970s.
The fund, however, will come out on the other side of its financial straits, Oxenford said.
“Given that NBIM is highly diversified and pursues a long-term investment strategy, it is likely to weather this storm, although the exceptionally high growth rates we saw in 2020 and 2021 are unlikely to return, as global central bank interest rates are not likely to return to pandemic-era near-zero levels anytime soon,” he said.
Inflation, interest rate hikes and the war in Europe hit major US indexes hard, with the Dow Jones Industrial Average losing more than 15% in the first six months of the year, the S&P 500 up over 20% and the Nasdaq Composite up almost 30%. %.
Correction: Norway’s sovereign wealth fund had a loss of NOK 1.68 trillion in the first half of 2022. An earlier version got the figure wrong.
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