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Norway’s $1 trillion wealth fund generates €20bn return in Q2

Staff Writer | August 21, 2018
Norway’s $1 trillion wealth fund had a return of $20 billion in the second quarter, erasing losses for the year, even as it faces growing challenges to its global investment model.
Norway wealth fund
Europe   Its total stock holdings rose 2.7 percent
Helped by a rally in U.S. markets and oil and gas stocks the world’s biggest wealth fund delivered a return of 1.8 percent in the second quarter, or 167 billion kroner ($20 billion).

Its total stock holdings rose 2.7 percent, while bonds were unchanged and real estate provided a 1.9 percent return.

“In the second half of the period, the prospect of increased trade barriers and a weaker growth outlook in Europe, China and emerging markets had an adverse effect,” the fund said.

“Political uncertainty in Italy impacted negatively on European financial markets.”

Investing Norway’s oil wealth abroad, the fund has been set up to capture the fruits of globalization and the growth it drives, a philosophy that’s now being challenged by US president Donald Trump’s imposition of tariffs on key trading partners across the world.

The investor, which owns about 1.4 percent of global stocks, also sticks closely to indexes, making it hard to navigate around global turmoil.

“The prospect of increased trade barriers is something that is high on everybody’s agenda, and of course for a long-term global investor like the fund,” Trond Grande, the fund’s deputy chief executive officer, said at a press conference.

The fund lost 5.7 percent in emerging market stocks and 4 percent on Chinese equities.

The biggest sector driver for its returns were oil and gas stocks, which it has proposed divesting. Financial stocks were the weakest performers, led by Banco Santander.

At the end of the quarter, the fund held 66.8 percent in stocks, 30.6 percent in bonds and 2.6 percent in real estate. The return missed the benchmark index by 0.2 percentage point.