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Norway’s wealth fund posts $34bn loss in Q3 2023

Abu Dhabi’s non-oil sector grew by 12 percent in the second quarter, making up 54% of total GDP Reuters/Chaiwat Subprasom
Abu Dhabi’s non-oil sector grew by 12 percent in the second quarter, making up 54% of total GDP
  • ROI at minus 2.1% for quarter
  • Real estate assets lose 3.3%
  • Rising interests rates blamed

Norway’s $1.4 trillion sovereign wealth fund, the world’s largest, posted a 374 billion crown ($33.8 billion) loss in the third quarter, the fund said on Tuesday, after seeing heavy drops in the value of equities and bonds.

The fund’s return on investment was minus 2.1 percent for the July-September period, 0.17 percentage points stronger than the return on its benchmark index.

Equities, its biggest asset class, accounting for 70.6 percent of its value in the quarter, saw a 2.1 percent loss. Fixed income investments, which account for just above another quarter of its assets, returned a loss of 2.2 percent, and real estate assets lost 3.3 percent.

The fund’s deputy CEO, Trond Grande, told Reuters that the broad-based nature of the decline “maybe indicates that there is a little bit of a fundamental macro factor driving this and one would point to the continued rising interest rates.”

Equities over the past year have outperformed compared to other asset classes, Grande said.

But there too, the fund had “a little bit of concern”, he said, as the growth was “really concentrated on a few super-large US tech companies”.

Asked whether he saw a higher risk of a correction in markets now compared with three months ago, Grande said he did not.

However, “we’ve been warning that we come from a rather long period of low interest rates, and also expansive […] fiscal policies”, he said.

“When the interest rates rise this much and this fast, obviously there’s going to be businesses that need to refinance and finance themselves on higher rates. And the question is, if all are well positioned to do that with the profitability.”

The fund is little exposed, with 0.1 percent of its investments, equivalent to 20.4 billion crowns, held in Israel as of October 6, the eve of the start of the conflict.

It has not changed its investment strategy there, but is monitoring the situation, the fund previously told Reuters.

Grande said on Tuesday: “To the extent it has the potential to grow into a bigger and more regional conflict, that’s obviously concerning.”