Norway’s $1.2 Trillion Fund Says Don’t Bet on V-Shaped Rebound Just Yet
Norway’s $1.2 Trillion Fund Says Don’t Bet on V-Shaped Rebound Just Yet
(Bloomberg) -- Norway’s $1.2 trillion sovereign wealth fund says it’s too early to assume markets will bounce back in a V-shaped recovery, given the current trajectory of the coronavirus pandemic.
“All markets, and some more than others, have had a quick recovery,” said Trond Grande, the deputy chief executive of the Oslo-based fund. “So it might look more like a V. But the unrest isn’t over. The pandemic isn’t under control yet, and we don’t know yet if it’s a V or a W.”
The investor lost $21 billion in the first half, after a rebound in the three months through June failed to fully erase the decline brought on by the Covid-19 crisis at the beginning of the year.
In previous crises, Norway’s wealth fund has used its vast resources to buy on the cheap. Back in 2009, after the financial crisis, the fund was building its stock portfolio while at the same time receiving record cash injections from Norway’s oil income. The combination of factors led to its best quarterly result ever.
The situation is different this time round. Oil revenues have dwindled amid a market slump, and government withdrawals have forced the fund to sell bonds rather than buy stocks in order to rebalance its portfolio.
“It’s perhaps difficult to imagine that a situation like this will come again,” Grande said, referring the the record stock returns a decade ago. “But it’s obviously important to have such a rebalancing rule to ensure a steady and almost constant portfolio risk.”
©2020 Bloomberg L.P.