Veriton Investment

Norway’s $1.9 Trillion Fund Has Best Quarter Since 2023

(Bloomberg) -- Norway’s sovereign wealth fund enjoyed its best quarter since late 2023, returning 6.4% in the second quarter, propelled by stock-market gains.

Equities drove the results for the $1.9 trillion fund, at 8.45%, with unlisted infrastructure investments generating 8.1%, Norges Bank Investment Management said in a report on Tuesday. Fixed income and unlisted real estate had a small positive contribution.

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Norway’s wealth fund, the world’s largest, owns about 1.5% of listed stocks globally. More than two thirds of the fund is in equities, all outside of Norway. A big chunk of its holdings are in the US, including tech companies such as Apple Inc, Microsoft Corp, Nvidia Corp., Alphabet Inc, Amazon.com Inc and Meta Platforms.

The fund’s first-half return was 5.7%, missing the benchmark it measures itself against by 5 basis points. European stocks gained the most, at 17.8%, versus just 1.4% for North American stocks.

“The result is driven by good returns in the stock market, particularly in the financial sector,” Chief Executive Officer Nicolai Tangen said.

Financial firms returned 16.5% in the first six months of the year and accounted for 17% of the equity investments, NBIM said. The greatest contribution came from European banks, “driven by expectations of increased public expenditure and further healthy profitability.” Other positive drivers included telecommunication companies and utilities, while health care performed the weakest, the fund said.

A stronger currency weighed on the fund, contributing to a drop in its overall value by 0.8% to 19.6 trillion kroner ($1.9 trillion) at the end of the period from the year end.

Founded in the early 1990s, NBIM invests the Nordic country’s oil and gas revenues abroad for the benefit of future generations. It follows a benchmark index set by the finance ministry and has limited scope for active investing.

On equities, it tracks the FTSE Global All Cap index with holdings in about 8,700 listed companies in 44 countries, while the fixed-income portion of the fund follows Bloomberg Barclays indexes, with 70% allocated to government bonds and 30% to corporate securities.

The fund has been under pressure lately due to its investments in some companies contributing to Israel’s war in Gaza. It’s terminating all contracts with external managers in Israel following public outcry, and has divested from 21 Israeli firms in total since the war started.

Speaking to reporters on Tuesday, Tangen said he has no plans to step down as CEO, while acknowledging the fund should have acted faster to take back management of those holdings.

--With assistance from Stephen Treloar, Kari Lundgren and Rob Dawson.

(Updates with 2Q returns, details in sector drivers, from first paragraph)