Government Pension Fund Global, Oslo, returned -4.9% for the three months ended Sept. 30, and -0.79% for the year ended the same date, as volatile markets hit equities investments in particular.
Despite the negative return, the sovereign wealth fund’s value increased 1.8% to 7 trillion Norwegian kroner ($823 billion as of Sept. 30). The relative weakness of the Norwegian kroner vs. other currencies over the quarter increased the fund’s value by 382 billion Norwegian kroner. The Norwegian government also transferred 12 billion Norwegian kroner of new capital into the fund.
Equity investments returned -8.6% over the three months, and -1.9% over the year ended Sept. 30. The sovereign wealth fund has a 59.7% allocation to equities. The fund’s quarterly report said equity returns were weak in all regions — China equities returned -21.3%; U.S., -6.8%; and European stocks, -7.2%.
The remainder of the sovereign wealth fund is invested in fixed income and real estate. The fund’s 37.3% fixed-income allocation returned 0.9% over the quarter and -0.26% for the year ended Sept. 30; while the 3% allocation to real estate returned 3%, and 8.25% over the year ended the same date.
The absolute return of -4.9% is the third-weakest result in local currency since the sovereign wealth fund’s inception, said a statement accompanying the quarterly report.
“We have to expect fluctuations in the value of the fund when there are large movements in the market,” said Yngve Slyngstad, CEO of Norges Bank Investment Management, which manages the fund, in the statement. “With the fund as big as it is today, this can have a considerable impact in the short term. The fund has a long-term horizon, however, and is in a good position to ride out short-term market volatility.”
