World's biggest wealth fund posts record gains, losses amid pandemic

Agence France-Presse

Posted at Aug 19 2020 05:17 AM

OSLO - Norway's sovereign wealth fund, the world's biggest, posted both record quarterly gains and losses in the first half, yo-yoing on market volatility during the COVID-19 pandemic.

After hemorrhaging 1.35 trillion kroner (117 billion euros) in the first quarter of the year when the pandemic put the brakes on the world economy, the fund saw its value soar by 1.10 trillion kroner in the second quarter as markets recovered, boosted by budgetary and monetary policies. 

"The first quarter was historically the fund's worst quarter in terms of returns" in Norwegian kroner, the deputy chief executive of the fund, Trond Grande, said as he presented first-half results.

"Meanwhile the second quarter was the most robust quarter ever," he added.

The fund, created in the 1990s to help grow the state's oil revenues, nonetheless lost 188 billion kroner (18 billion euros, $21 billion) in the first half of the year.

Its overall value, which totaled 10.4 trillion kroner (989 billion euros) at the end of June, depends on the portfolio's returns as well as costs, currency rates, and government withdrawals such as recently to ease the economic impact of the pandemic.

As stocks account for 69.6 percent of its investments, the fund closely follows the markets.

After "a dramatic fall on all the world's markets" in early 2020, the investments showed "a surprisingly quick rebound" before the summer, especially in the United States, Grande said.

Invested in more than 9,200 companies, the fund controls about 1.5 percent of the world's market capitalization.

"Even though markets recovered well in the second quarter, we are still witnessing considerable uncertainty," Grande said.

The fund's share portfolio posted a negative return of 6.8 percent in the first six months, while real estate investments, which represent 2.8 percent of the portfolio, also posted a 1.6 percent negative return.

Bond investments, which account for 27.6 percent of assets, however, posted a gain of 5.1 percent.

The fund is meanwhile still mired in controversy over the appointment of a new chief executive.

Nicolai Tangen, a billionaire who founded the AKO Capital hedge fund in London, is due to take over on September 1, replacing Yngve Slyngstad who is stepping down.

But critics have complained about Tangen's possible conflicts of interest, as well as his use of tax havens. 

The central bank has meanwhile been criticized for irregularities in the recruitment process.

As a result, some major political parties are opposed to Tangen's appointment and it remains up in the air.