Global Markets
Norway's $2.3 trillion wealth fund slips 0.5% in third quarter as bonds lose 3.5%
Norges Bank Investment Management lagged its benchmark as rising yields hit its fixed-income book, while unlisted renewables returned 7.5%.
HedgeWeekly News Desk ·
Norway's Government Pension Fund Global returned minus 0.5% in the third quarter, an accounting loss of 278 billion kroner, Norges Bank Investment Management said on Thursday. Reuters put the loss at about $29.7 billion. The fund trailed its benchmark index by 0.18 percentage points, and its market value stood at 22,014 billion kroner on September 30.
Fixed income did the damage. The bond portfolio, 25.8% of the fund, lost 3.5%, while equities, at 72.1%, returned 0.5%. Deputy chief executive Trond Grande said returns were close to flat and that equity performance varied widely by sector, with energy companies rising most and rate-sensitive sectors such as utilities and real estate falling. Unlisted real estate returned 0.4% and unlisted renewable energy infrastructure 7.5%, though the latter is only 0.5% of assets.
Currency moves mattered more than performance to the headline value. A stronger krone cut the fund's value by 472 billion kroner, and it fell 670 billion kroner in total over the quarter despite an inflow of 80 billion kroner after management costs. The fund, which invests Norway's oil and gas revenue, owns on average 1.5% of all listed companies worldwide across about 7,100 holdings, according to Reuters.
For allocators, the quarter is a reversal of the first half, when the fund returned 9.4%, equities gained 13.0%, bonds made 0.9% and it beat its benchmark by 0.22 percentage points. A 3.5% quarterly bond loss at a fund that owns on average 1.5% of every listed company underlines how the global rate selloff has weakened fixed income as a diversifier for balanced portfolios. The next markers are fourth-quarter yields, the krone and whether the fund's active management can recover its relative shortfall by year-end.