World’s largest fund posts first loss in three years

The world’s largest sovereign wealth fund lost €7.95bn in the second quarter, the first decline in three years, dragged down by falling global bond and stockmarkets.

The fund fell 0.9%, as its stock holdings lost 0.2% and its bonds declined 2.2%, the $870bn (€786.7bn) fund said in a statement yesterday. Its real estate holdings rose 2%.

“The return on fixed income investments was affected by an increase in yields in the fund’s main markets,” said chief executive of the fund Yngve Slyngstad.

“On the equity side, US stocks pulled down the result.”

The Oslo-based fund, where Norway places most of its oil wealth to avoid overheating the economy, has reached its peak amid a collapse in oil prices, according to the central bank.

Mr Slyngstad has also warned that the fund faces diminished returns as central banks across the developed world have unleashed stimulus that has driven bond yields to record lows.

It held 62.8% in stocks at the end of June, up from 62.5% in March.

Bond holdings fell to 34.5% from 35.3% and it held 2.7% in real estate.

The fund is mandated by the government to hold about 60% in stocks, 35% in debt and 5% in properties.

US and European stocks and bonds declined in the quarter on concern over the situation in Greece and amid speculation the Federal Reserve will start raising interest rates this year.

The fund’s largest stock holdings were Nestle and Apple, followed by Novartis.

The biggest bond holdings were in US, Japan and Germany. Investments in emerging markets equities returned 1.5% in the quarter, accounting for 9.6% of the fund’s stock holdings.

It invested for the first time in Saudi Arabian participation certificates as it increases exposure to emerging markets.

US Treasuries made up 17% of the fund’s bond holdings followed by Japanese and German government debt.

Its largest increase in fixed-income holdings were in German, Chinese and Austrian bonds while it cut holdings in bonds from Japan, France and the UK.