Norway’s wealth fund loses 14% as inflation, war hit markets

Bloomberg

Norway’s $1.3 trillion sovereign wealth fund reported its biggest loss since the 2008 financial crisis after markets were pummeled by faster inflation, higher credit costs and the fallout from the war in Ukraine.
The fund that manages Norway’s fossil wealth lost 14.1% in 2022, equivalent to about $164 billion, according to a statement on Tuesday. It’s the world’s biggest single owner of equities, and its returns highly dependent on market movements.
Chief Executive Officer Nicolai Tangen has spent the past year warning that the fund’s growth over the past 25 years isn’t likely to continue in an environment of rising borrowing costs and soaring inflation that have brought equities down from all-time highs. Generating excess return in falling markets is key, he has said. The fund managed that last year, outperforming the benchmark against which it measures itself.
“The market was impacted by war in Europe, high inflation, and rising interest rates,” Tangen said in the statement. “This negatively impacted both the equity market and bond market at the same time, which is very unusual. All the sectors in the equity market had negative returns, with the exception of energy.” Established in the 1990s to invest Norway’s oil riches, the fund has achieved an average return of 6% over the quarter of a century during which it’s existed.
Last year, Norges Bank Investment Management lost 15.3% on stocks and 12.1% on its fixed-income investments. Its unlisted real estate holdings edged up 0.1%, while the return on unlisted renewable-energy infrastructure was 5.1%.
The fund is largely an index-tracker, investing according to a strict mandate from the Finance Ministry. It seeks to make the most of its limited leeway to try to beat the benchmark it is measured against.