Norway’s wealth fund returns -3.4% for first half of year

Government Pension Fund Global, Oslo, returned -3.4% for the first half of 2020, as losses in the fund's equity exposure dragged down positive fixed-income performance.

The sovereign wealth fund’s investment return was equivalent to a 188 billion Norwegian kroner ($19.4 billion) loss, the fund’s interim report said Tuesday. The return was 0.11 percentage points lower than the fund’s benchmark index set by the Ministry of Finance.

The overall investment return for the first half of 2019 was not available.

The investment return in the second quarter was 13.1%, bouncing back from -14.6% in the first quarter. For the second quarter of 2019, the investment return was 3%.

Total assets at the fund grew 2.8% over the six-month period and 17.2% over the year ended June 30, to 10.74 trillion kroner.

GPFG’s equity investments returned -6.8% for the first half. The fund had a 69.6% allocation to equities as of June 30. The 27.6% fixed-income allocation gained 5.1% over the first half, while the 2.8% allocation to unlisted real estate returned -1.6%. Comparable figures for the first half of 2019 were not available.

First-half equity returns were buoyed by technology holdings, which gained 14.2% over the period, the report said. Technology stocks accounted for 17.9% of the fund’s equity allocation.

For the second quarter, equity exposures gained 18.1%, up from -21.1% for the first quarter. In the second quarter 2019, equity exposures gained 3%.

Fixed-income investments gained 3.8% in the second quarter and 1.3% in the first quarter, boosted by lower interest rates, the report said. For the second quarter 2019, fixed-income investments gained 3.1%.

Unlisted real estate returned -2% in the second quarter after gaining 0.4% in the first quarter. For the second quarter 2019, unlisted real estate gained 0.8%.

“There were major fluctuations in the equity market in this period,” Trond Grande, deputy CEO of Norges Bank Investment Management, which runs the fund’s assets, said in a news release. “The year started with optimism, but the outlook of the equity market quickly turned when the (coronavirus) started to spread globally. However, the sharp stock market decline of the first quarter was limited by a massive monetary and financial policy response.”

Mr. Grande warned that despite a recovery in the second quarter, there is still “considerable uncertainty” in markets.

Depreciation of the Norwegian kroner against other currencies increased the fund’s value by 672 billion kroner in the first half, compared with a 98 billion kroner loss in the first half of 2019.