"You can point to the rising interest rates through the quarter," Deputy Chief Executive Officer Trond Grande said in an interview Oct. 24. Energy stocks performed best, he said, while technology, industrials and consumer discretionary dragged down the return.
The loss comes after tech stocks including Apple, Microsoft and NVIDIA helped fuel a 10% return for the investor in the first half of the year, a rebound from a year earlier when surging inflation weighed on global markets. Inflation remains problematic, Chief Executive Officer Nicolai Tangen said in August, adding that heat and extreme weather linked to climate change make it harder to bring prices under control.
"We were coming from a long period of ultra-low rates and abundant liquidity," Grande said Oct 24. "When rates start to rise, that takes some adjustments to business models that were used to the lower rates," he said. "That, in the shorter run, is what needs to work through the global economy."
Created in the 1990s to invest Norway's oil and gas revenues abroad, the fund owns about 1.5% of global equities, largely tracking a benchmark index based on a framework handed down by parliament.
"We have had 15 or 20 years of globalization and increased cooperation between nations, longer supply chains," Grande said. "That is now changing — there's a lot of talk about derisking, about near-shoring and home-shoring. That's going to have consequences for the companies and their profitability."
The investor has been asked by Norway's finance ministry to provide advice on whether private equity should be added to its portfolio, a possibility last explored by the fund in 2018. It said last month that private equity buyouts have meaningfully outperformed public equities. NBIM lost 3.3% on its unlisted real estate holdings, while the loss on unlisted renewable-energy infrastructure was 2.4%.
The fund had 70.6% in stocks as of the end of September, 27.1% in bonds, 2.2% in unlisted real estate and 0.1% in renewable energy infrastructure.
The government deposited 139 billion kroner ($13 billion) into the fund in the quarter.