Norway wealth fund posts biggest quarterly loss in 2 years

In addition to Russia's invasion of Ukraine, global markets also took a hit from a rise in COVID-19 infections led by the Omicron variant in the quarter, as well as a surge in inflation that drove down the value of government bonds. The value of the fund's Russian assets plunged almost 90% to 2.9 billion Norwegian crowns in the first three months of the year, Grande said, in line with the company's earlier assesment.

Norway's sovereign wealth fund, the world's largest, reported on Thursday its weakest quarter in two years as inflation and the Ukraine crisis hit both stock and bond valuations.

The $1.3 trillion fund posted a January-March loss of 653 billion Norwegian crowns ($74.2 billion), a negative investment return of 4.9%, which was still 0.66 percentage points better than the return on the fund's benchmark index. It was the fund's weakest quarter since losing $114 billion in the first three months of 2020 when the COVID pandemic first hit markets.

The fund quickly rebounded from that, however, and in 2021 posted its second-best year on record. But the outlook remains uncertain, said deputy CEO Trond Grande of Norges Bank Investment Management, which operates the fund. "It is maybe a bit surprising that the markets, especially the stock markets, haven't reacted more on the fact that we now have a war on European soil," Grande told Reuters.

"We should be prepared that it could stay uncertain, and the most important thing then is that we have a long-term investment strategy that can withstand short-term swings," he said. In addition to Russia's invasion of Ukraine, global markets also took a hit from a rise in COVID-19 infections led by the Omicron variant in the quarter, as well as a surge in inflation that drove down the value of government bonds.

The value of the fund's Russian assets plunged almost 90% to 2.9 billion Norwegian crowns in the first three months of the year, Grande said, in line with the company's earlier assesment. In total, 70.9% of the fund was invested in equities at the end of March, while 26.3% was invested in fixed income, 2.7% in unlisted real estate and 0.1% in unlisted renewable energy infrastructure.

Founded in 1996, the fund invests revenue from Norway's oil and gas sector and holds stakes in some 9,300 companies globally, owning 1.3% of all listed stocks. The fund holds the equivalent of $240,000 for every Norwegian man, woman and child.

($1 = 8.8006 Norwegian crowns)