Norway’s Wealth Fund Lost $174 Billion in First Half

© Bloomberg. Nicolai Tangen Photographer: Fredrik Solstad/Bloomberg

(Bloomberg) -- Norway’s $1.3 trillion sovereign wealth fund, the world’s biggest, posted its biggest loss since the pandemic as rate hikes, surging inflation and Russia’s invasion of Ukraine spurred volatility.

The Oslo-based fund lost an equivalent of $174 billion in the six months through June, or 14.4%, it said on Wednesday. The loss in the second quarter amounted to 10%, the investor’s biggest since its record loss of 14.6% in the first quarter of 2020.

Chief Executive Nicolai Tangen told lawmakers in May that greater uncertainty and more risk is the new normal for the world’s biggest owner of publicly traded companies, and it now probably faces the greatest changes in 30 years due to the geopolitical consequences of the war in Ukraine.

“The market has been characterised by rising interest rates, high inflation, and war in Europe,” Tangen said in the statement. “Technology stocks have done particularly poorly with a return of -28%.”

In the first half, the fund shed 17% on stocks, where it has the bulk of its investments, and lost 9.3% on fixed income. Energy sector was the only one with a positive return, of 13%, cushioning the blow thanks to sharp price increases for oil, gas and refined products.

Its unlisted real-estate holdings gained 7.1%, boosted by logistics, though they account for 3% of its investments.

Norway decided on Feb. 27 to drop Russian assets from the fund in response to the country’s invasion of Ukraine, but ran into problems with implementing the decision after Russia banned foreigners from executing trades on its stock markets.

Norges Bank said in March that it will return with a recommendation on lifting a freeze on the fund’s investments in Russia once markets are functioning more normally, along with more detailed recommendations on carrying out the sale.

Created in the 1990s to invest Norway’s oil and gas revenues abroad, the fund has a portfolio of about 9,000 stocks, and delved into renewable infrastructure for the first time last year.

Overall, the fund’s total return was 1.14 basis points higher than that of the benchmark against which it measures itself.

(Updates with quarterly return in 2nd paragraph, energy)

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