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Sovereign Wealth Funds

Norwegian sovereign wealth fund records its best first-half return

Norway's Government Pension Fund Global, Oslo, returned 2.6% in the three months ended June 30, helping to bolster assets 2% to 8 trillion Norwegian kroner ($952 billion).

The return, equivalent to a 202 billion kroner gain, compared to a 3.8% return for the three months ended March 31 and 1.3% return for the quarter ended June 30, 2016. Assets increased 11.7% over the year ended June 30.

Taking into account management costs and inflation, the sovereign wealth fund returned a net real return of 11.32% for the year ended June 30, 5.14% for three years, 8.1% for five years and 3.65% for 10 years. Multiyear returns are annualized.

An update by the manager of the fund, Norges Bank Investment Management, said equity investments, which accounted for 65.1% of the asset allocation, returned 3.4% in the quarter. The equity allocation returned 5.5% in the previous quarter.

Fixed-income investments returned 1.1% in the three months ended June 30, compared with 0.8% in the three months ended March 31. Fixed-income exposure totaled 32.4% of the total portfolio. The remaining 2.5% is invested in unlisted real estate, and returned 2.1% for the quarter. That compared to a 0.6% return for the previous quarter.

"The stock markets have performed particularly well so far this year, and the fund's return in the two first quarters was 6.5%," said Trond Grande, deputy CEO of NBIM, in a statement accompanying the update. "This gives a total return of 499 billion kroner, which is the best half-year return measured in Norwegian kroner in the history of the fund. We cannot expect such returns in the future. The record-high return is primarily due to the fact that the fund has become so large."

Foreign-exchange moves detracted from the fund's value, with the kroner appreciating vs. other currencies. This decreased the value of the fund by 32 billion kroner. For the previous quarter, currency effects added 83 billion kroner to the fund's value.