(Bloomberg) -- Norway’s $1.7 trillion sovereign wealth fund returned 8.6%, or $138 billion, in the first half as a surge in technology stocks was restrained by weak returns in bonds, real estate and renewable energy infrastructure.
Norges Bank Investment Management, which handles Norway’s fossil-fuel wealth, saw investments in equities gain 12% in the six months through June, it said in a statement Wednesday. The fund underperformed its own global benchmark index by 0.04 percentage point, NBIM said, with real estate continuing to weigh on returns and an underweight in equities also pulling downward.
Created in the 1990s to invest Norway’s oil and gas revenues abroad, the fund is the world’s biggest single owner of equities. It invests according to a strict mandate from the Finance Ministry, measuring itself against a bespoke benchmark index based on the FTSE Global All Cap Index for equities and Bloomberg Barclays indexes for fixed income. The bulk of NBIM’s capital is in publicly listed equities.
Fixed-income investments were down about 1%, as was the value of unlisted real estate holdings — impacted by mounting vacancies in the US office sector and high policy rates. Unlisted renewable energy infrastructure dropped 18%, the fund said. The fund has a higher share of short-maturity bonds than the benchmark index, which contributed positively to relative performance, it said.
“What worries us here is the debt levels we are seeing in many countries, the budget deficits which continue to be there, continue to build,” Chief Executive Officer Nicolai Tangen said in an interview with Dani Burger and Lisa Abramowicz on Bloomberg TV. “You see what can happen if you get these kind of Truss moments, which we saw in in the UK, where suddenly people lose faith and that’s probably the biggest risk we are facing today,” he said, referring to market turmoil stemming from Liz Truss’s economic policies during her brief stint as UK prime minister in 2022.
After gaining in the first half, global stock markets have dipped in recent weeks and remain on edge. The outlook for Federal Reserve interest-rate cuts, as well as lukewarm results from tech giants such as Amazon.com Inc, Microsoft Corp. and Alphabet Inc. have fed the volatility. Still, the fund said on Wednesday that its year-to-date return through to the close of US markets on Tuesday was 8.5%.
NBIM’s performance is roughly in the middle of the pack when measuring the 10-year annualized returns of 50 sovereign investors around the world through 2023, according to data compiled by Global SWF.
NBIM said yesterday that it pared its stakes in Meta Platforms Inc., Novo Nordisk A/S and ASML Holding NV — all among its top 10 holdings — during the first half of the year. Apple Inc., Microsoft and Nvidia Corp. were its three biggest equity investments at the end of June.
“We have a small underweight in the large tech companies, but we haven’t made any very major bet on this,” Tangen said in an interview.
Asked about the concentration among big tech, Tangen rebuffed any suggestion of regulatory moves to chop them up.
“As big owners, we are not advocating to split up the large tech companies,” he said. “We think that things like AI should be regulated and we really need to have responsible use of AI, but we are not really interfering in the debate about whether these tech companies, whether we should go after them or not.”
He also downplayed the significance of the November US presidential race to the markets.
“We think generally speaking that the large US companies we’re invested in will continue to do well whoever wins the election,” Tangen said. “You’d be surprised by how little we think about the US election, because we are invested in US companies and both parties are in our minds pro-business.”
--With assistance from Dani Burger, Lisa Abramowicz and Annmarie Hordern.
(Updates with CEO comments from fifth paragraph.)
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