Al-Arabiya Net — Norway's sovereign wealth fund, the world's largest, recorded a loss of 278 billion Norwegian kroner ($29.7 billion) during the third quarter, driven by a decline in the performance of its fixed-income investments amid rising global interest rates.
The Norges Bank Investment Management (NBIM) fund, which manages $2.3 trillion in assets, announced that its bond investments generated a negative return of 3.5% during the period, serving as the primary factor behind the third-quarter losses.
The Fund Invests Approximately 70% of Its Fixed-Income Portfolio in Government Bonds
The Norwegian sovereign fund invests approximately 70% of its fixed-income portfolio in government bonds, while allocating the remainder to corporate debt.
The results came at a time when global bond markets experienced a widespread sell-off, with government bond yields rising following the initiation of interest rate hike cycles by several major central banks, spearheaded by the US Federal Reserve, amid escalating concerns over inflation and government debt levels.
Trond Grande, Deputy CEO of the fund, stated that the fund's return was close to breakeven but ended slightly in negative territory after rising interest rates weakened the performance of fixed-income investments.
Bonds Account for Just Over a Quarter of the Fund's Assets
Bonds account for slightly more than a quarter of the fund's assets, which holds investments in 1,664 bond issues distributed across 51 countries.
The Fund Announced a Plan to Reduce Its Exposure to Sovereign Debt
Last month, the fund announced its intention to reduce its holdings of US Treasury bonds as part of a broader plan to curtail its exposure to sovereign debt.
Conversely, equity investments, which represent 72% of the fund's assets, generated a positive return of 0.5% during the third quarter.
The Fund Is the World's Largest Single Investor in Equity Markets with a Stake of Nearly 1.5%
The fund holds minor stakes in approximately 7,100 listed companies worldwide, making it the world's largest single investor with a stake of approximately 1.5% of all listed companies in financial markets.
Equity markets experienced volatility during the three months ending in September, with the S&P 500 index rising by 2.03%, the Dow Jones Industrial Average falling by 1.9%, and the Nasdaq Composite index advancing by 2.2%. The average performance of the three indices was only about 0.6%, marking a notable slowdown compared to the double-digit gains recorded by the markets in the previous quarter.
The fund is one of the largest investors in US mega-cap companies, with prominent holdings including a $65.4 billion investment in Nvidia, alongside stakes in Apple, Alphabet, and Microsoft, granting it influential weight in global investment trends and corporate voting rights.
Grande explained that equity performance was also close to zero, but sector divergences were wide, with energy companies leading the gains, while interest rate-sensitive sectors such as utilities and real estate faced notable pressures.
Energy stocks benefited from rising oil prices during the third quarter amid the ongoing war between the United States and Iran, according to the fund, which holds investments in major companies including ExxonMobil, Shell, and Chevron.
Fund CEO Nicolai Tangen had warned during the summer against expecting the continuation of the exceptional gains achieved by equity markets during the first half of the year, stating that investors should not expect a repetition of the same return levels in the coming months.
The fund achieved a return of 12.95% in the first half of the year, recording record profits approaching $185 billion. Additionally, its investments in real estate and renewable energy infrastructure yielded 0.4% and 7.5% respectively during the third quarter.
The Norwegian sovereign wealth fund was established in 1998 to invest revenues generated from the oil sector, before evolving into the world's largest sovereign wealth fund by asset size.
