Norway’s US$1.4 trillion wealth fund returns 10% on tech surge

NORWAY’S US$1.4 trillion sovereign wealth fund returned 10 per cent or US$143 billion in the first half, indicating it’s back on track following one of the worst years in its history.

The manager of Norway’s oil and gas riches gained just under 14 per cent on equities in the six months through June, while fixed-income investments returned 2.3 per cent, according to the report posted on its website late on Tuesday (Aug 15). Unlisted real estate holdings were down 4.6 per cent. The fund’s report was set to be released on Wednesday.

The return was boosted by a rebound in technology stocks after a weak 2022.

The Oslo-based fund managed to navigate the wobbly investment environment in the first part of the year as fast inflation and central bank campaigns to tame price increases coincided with banking industry tumult in the US and Europe.

Still, the fund took a hit on the collapse of SVB Financial Group’s Silicon Valley Bank, prompting chief executive officer Nicolai Tangen to tell lawmakers in April that he was focused on minimising exposure to so-called rotten apples going forward. He has also repeatedly warned that borrowing costs and soaring inflation are likely to weigh on returns in the years to come.

Its biggest stock holdings were Apple, Microsoft and Alphabet at the end of the half, while its largest bond holdings were in US Treasuries, followed by Japanese and German government bonds.

The fund underperformed its benchmark by 0.23 percentage point, pulled down by unlisted real estate and renewable energy infrastructure, marking a third straight quarter of negative relative returns, Norges Bank Investment Management (NBIM) said.

Unlisted property contributed a negative 0.26 percentage point, driven primarily by investments in the US office sector.

Expected shortfall, or the expected loss of a portfolio in extreme market situations, dropped to 1.04 percentage points from 1.22 percentage points at the end of 2022.

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The credit quality of the bond portfolio was virtually unchanged compared to year-end.

More than 80 “unwanted operational events” were registered in the first half, losing the fund about 1.1 billion kroner (S$141.8 million).

Most of this loss was associated with a single mistake caused by the incorrect data being used, NBIM said.

Created in the 1990s to invest Norway’s oil and gas revenues abroad, the fund – also known as Norges Bank Investment Management – is the world’s biggest single owner of equities, largely tracking a benchmark index based on a framework handed down by parliament.

It is increasingly using its muscle to take a stronger stance against companies that fail to prioritise action on climate change, gender balance and executive pay.

It voted on over 94,000 shareholder proposals in the first half and held 1,675 company meetings.

Equities made up 71.3 per cent of the value of the fund, fixed income 26.4 per cent and unlisted real estate 2.3 per cent, while unlisted renewable energy infrastructure made up 0.1 per cent, it said.

The government deposited 389 billion kroner into the fund in the six months through June. BLOOMBERG