Norway’s oil fund posts biggest ever loss in turbulent markets

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Norway’s oil fund, the world’s largest sovereign wealth fund, swung to its biggest ever loss in the first half of 2022 as recession fears and inflation pummeled global markets.

Returns on the $1.2tn fund dropped 14.4 per cent, or $174bn, in the first half, driven by a sell-off across all sectors except energy, the fund said on Wednesday. It had gained 14.5 per cent during 2021 as markets soared following the reopening of economies around the world.

Its equity portfolio was particularly hit hard in the first half, losing 17 per cent, while fixed income was down 9.3 per cent. The fund’s investments in unlisted real estate delivered a 7.1 per cent gain but they make up only 3 per cent of the fund’s overall portfolio. Its renewable energy infrastructure investments fell 13.3 per cent.

“The market has been characterised by rising interest rates, high inflation, and war in Europe . . . Technology stocks have done particularly poorly with a return of -28 per cent,” said Nicolai Tangen, the fund’s chief executive.


“The fund is now so big that the sums become very big . . . But we are a long-term investor so we have to tolerate these kinds of swings,” he added. “What was unusual this time is that we lost money both in stocks and bonds.”

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He also said that in the same period, “the energy sector returned 13 per cent. We have seen sharp price increases for oil, gas, and refined products.”

Nicolai Tangen: ‘We are a long-term investor so we have to tolerate these kinds of swings’ © Fredrik Solstad/Bloomberg

The sovereign wealth fund, which owns the equivalent of about 1.5 per cent of every listed company in the world, had inflows of NKr356bn ($36.8bn) in the first half of 2022, while currency movements bumped up the fund’s value by NKr642bn. The MSCI All-World index of global stocks is down 14 per cent so far this year.

The fund said it had outperformed its own benchmark by 1.14 basis points.

Tangen had previously warned that Russia’s invasion of Ukraine would make inflation problems worse. In an interview with Financial Times in January, he also described himself as “the team leader for team permanent” in the debate on how long high inflation might last.

The oil fund was set up in 1996 to invest the proceeds of Norway’s oil and gas industry and is housed in its central bank. It is a quasi-index fund, with its overarching investment mandate set by the Ministry of Finance while material changes to how the fund invests must be approved by parliament.

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