Norway’s Sovereign Wealth Fund Benefits from Tech Stocks Again

Posted on 08/15/2023

Norway’s sovereign wealth fund, Norway Government Pension Fund Global (GPFG), generated a profit of 1,501 billion crowns (US$ 143 billion) in the first half of 2023. This was driven by stronger equity markets and a weak Norwegian crown currency. The US$ 1.4 trillion fund owns on average 1.5% of all listed stocks worldwide. It also invests in bonds, unlisted real estate, and a smidge in renewable energy projects.

Norway’s GPFG witnessed tech equity stocks perform best with the period’s strongest return of 38.6% after a poor year in 2022. The report says “the sector benefited from strong demand for new AI solutions from the biggest internet and software companies and their semiconductor suppliers.”

For listed equities, consumer discretionary was the second-strongest sector with a return of 20.7%. Consumption and economic activity held up despite higher prices and higher interest rates, and the lifting of pandemic restrictions in China led to further optimism, especially among luxury goods companies. Energy companies returned 0.4 percent. Prices for oil, gas and refined products fell back from the very high levels of 2022. North American and European stocks outperformed Asia and other emerging market stocks for the period. As of June 30, 2023, the largest equity holdings for Norway’s GPFG include Apple Inc at 358,871 million NOK, Microsoft Corporation at 332,607 million NOK, Alphabet Inc at 174,063 million NOK, Inc. at 152,257 million NOK, NVIDIA Corporation at 131,730 million NOK, Nestle SA at 100,258 million NOK, and Meta Platforms Inc. at 99,940 million NOK.

Fixed Income
Fixed-income investments returned 2.2 percent for the first half of the year. Inflation has fallen in NBIM’s main markets. Government bonds returned 1.1 percent for the first half and accounted for 55.6 percent of the fund’s fixed-income investments at the end of the period. The fund’s three largest holdings were of U.S., Japanese, and German government bonds. Japanese government bonds made up 8.5 percent of fixed-income investments and returned -6.8%. The Bank of Japan did not change its policy rate during the period. The weak return was down to a weaker yen.

Office Investments Get Hit
Total real estate investments returned -2.0 percent for the first half and amounted to 3.9% of the sovereign wealth fund at the end of the period. The main driver behind the negative return on unlisted real estate was the office sector, with U.S. investments in particular falling sharply in value during the period. This was due mainly to increased vacancy, which means reduced income for investors. The return on the listed portfolio was also affected by the negative performance in the U.S. office sector. Unrealized losses in unlisted real estate was -24,201,000,000 NOK (US$ 2,242,125,846) in June 30, 2023 versus -8,369,000,000 NOK as of December 31, 2022.

Renewables Perform the Worst
Investments in unlisted renewable energy infrastructure returned -6.5 percent for the first half of the year, due mainly to lower expected power prices.

The sovereign fund’s overall return, however, was 0.23 percentage point less than the return on the benchmark index.

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