The world’s largest sovereign wealth fund, which is Norwegian, has posted its biggest loss in four years, just as the government is preparing to make its first ever withdrawals to plug budget deficits.
The fund lost 273bn kroner (€29.4bn) in the third quarter, or 4.9%, as stocks declined 8.6% and bonds rose 0.9%, the Oslo-based fund said yesterday.
Real-estate holdings rose 3%. It was the first back-to-back quarterly loss in six years.
“We have to expect fluctuations in the value of the fund, when there are large movements in the market,” Yngve Slyngstad, chief executive of the fund, said.
“With the fund as big as it is today, this can have a considerable impact in the short-term. The fund has a long-term horizon, however, and is in a good position to ride out short-term volatility.”
The period was marked by turbulence, as worries of a China slowdown and prospects of a US rate increase wiped trillions of dollars off the value of global markets.
The MSCI World Index lost 9%, while the MSCI Emerging Markets Index plunged 19% in the quarter.
The sell-off was exacerbated by a rout in commodities. The fund had a loss of 21.3% on Chinese stocks in the period and 16.6% on its emerging-market equities.
Norway’s €778bn fund, which has grown more than six-fold amid a boom in oil prices over the past decade, is facing a new era, as cash injections may come to a halt as soon as next year.
Budget documents released this month showed the government will withdraw about €400m next year, as it uses up all its direct oil revenue to cushion the economy from a 50% drop in crude prices.
The shift comes as the fund warns of diminished returns held down by unprecedented monetary easing in the developed world.
The fund held 59.7% in stocks at the end of September, down from 62.8% in June.
Bond holdings rose 37.3%, from 34.5%, and it held 3% in real estate.
The fund is mandated by the government to hold about 60% in stocks, 35% in debt and 5% in properties.
The fund’s largest stock holding was Nestle and Apple.
The biggest bond holdings were in the US, Japan and Germany.
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