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Norwegian oil fund releases disastrous results, warns of tough times ahead

Its Russian equities were frozen in the wake of the invasion of Ukraine


Pete Carvill

Norges Bank Investment Management (NBIM) has released its results for the first half of 2022, saying that the firm saw a negative return of 14.4% over the period.

It confirmed that the return on the fund’s equity investments was -17% and fixed income was -9.3%, whereas investments in unlisted real estate returned 7.1%. The return on unlisted renewable energy infrastructure was -13.3%. The fund’s return was 1.14 percentage points better than the return on the benchmark index. It said that all sectors have seen negative returns, apart from energy, which returned 13%.

Nicolai Tangen, CEO of NBIM, said: “The market has been characterised by rising interest rates, high inflation, and war in Europe. Equity investments are down with as much as 17%. Technology stocks have done particularly poorly with a return of -28%.”

Around equities, the fund said in the accompanying report that the market in 2022 has been hit by rising interest rates, high inflation, and war in Europe. The fund’s Russian equities were frozen following Russia’s invasion of Ukraine.

Performance, it said, had been cushioned by the relationship between the Norwegian kroner and other currencies.

It wrote: “The krone depreciated against several of the main currencies during the quarter. The currency movements contributed to an increase in the fund’s value of NOK 642bn (€65bn). In the first half of the year, inflow into the fund amounted to NOK 356bn.”

CNBC interviewed Matthew Oxenford of the Economist Intelligence Unit who said the fund’s performance was symptomatic of a trend.

“The first half of 2022 saw significant upheaval in financial markets globally, and most diversified funds have seen declines in their value.”

Oxenford added: “Globally, much of this decline was driven by aggressive monetary tightening by central banks, which led to a sharp decline in investment in fast-growing firms in high-growth sectors such as tech (with Meta being the largest single source of loss in NBIM’s portfolio) as the return on safer investments increased and the global pool of high-risk investment shrinks.”

The Financial Times reported elsewhere that the NBIM’s head had warned in an interview that investors face difficult years.

Tangen told the publication: “Markets don’t go down in a straight line, and I’m worried that we can have tough times for an extended period. There is a risk that we haven’t seen the worst yet.”