Norway's $1 Trillion Wealth Fund Posts First Loss in Two Years

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(Bloomberg) -- Whipped by a global stock selloff, Norway’s $1 trillion wealth fund reported its first loss in two years in the first quarter.

The world’s biggest sovereign wealth fund lost 1.5 percent, or 171 billion kroner ($21 billion), the investor said in a statement on Friday. It lost 2.2 percent on stocks and 0.4 percent on bonds, while real estate provided a 2.5 percent gain.

At the end of the quarter, the fund held 66.2 percent in stocks, 31.2 percent in bonds and 2.7 percent in real estate. The return beat the benchmark index by 0.1 percentage point, helped by an overweight in European equities. Amazon.com Inc made the most positive contribution to returns, followed by Microsoft Corp and Netflix Inc.

While technology stocks were the best performers in the quarter, Chief Executive Officer Yngve Slyngstad said at a press conference that the fund is now analyzing the growing size of these companies and the risks they pose.

“We’ve seen that Facebook and Google, and many other companies, have found a very profitable business model,” Slyngstad said. But what has been questioned is the way information has been used and who’s ultimately the owner of that data, he said.

Volatility Spike

The fund, which owns on average 1.4 percent of the world’s listed stocks, closely follows indexes and has scant room to hide during global selloffs. Equity markets tumbled sharply at the start of the year amid a spike in volatility, which can bring opportunities, the CEO said.

“Our typical reaction to market turbulence triggered by geopolitical risk or something similar is to do nothing,” he said. “But when volatility is generated by the market’s own internal logic, there’s a much bigger chance that we will go out take positions as a result of that.”

The fund’s largest stock holdings at the end of the quarter were Apple Inc., Microsoft Corp., Nestle SA and Alphabet Inc. It’s largest bond holdings were in U.S. Treasuries, followed by Japanese and German government debt.

It last year got the go-ahead to boost the portion of stocks in its portfolio to 70 percent and the remainder in bonds. It can also hold a maximum of 7 percent of its investments in real estate.

The biggest increases in government bond holdings were in Italian, Brazilian and Indian bonds, with the biggest decreases were in Poland, South Korea and Mexico.

The government withdrew 11 billion kroner in the first quarter. With a recovery in oil prices and rising petroleum income for the government, it’s “obviously possible” that 2018 could be the first year since 2015 to yield a net deposit of cash into the fund, Slyngstad said.

©2018 Bloomberg L.P.

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