Norway wealth fund manager Norges Bank Investment Management reported a third-quarter accounting loss of 278 billion kroner ($29.7 billion) on Thursday, October 22, as rising interest rates weakened its bond investments. The $2.3 trillion sovereign wealth fund, the world's largest, recorded modest gains in equities but a negative return on fixed income.
Key Takeaways
- Fixed-income investments returned negative 3.5%, a key driver of the quarter's loss.
- Equities, which represent 72% of the portfolio, returned 0.5%, with sharp differences between sectors.
- NBIM previously outlined plans to cut U.S. Treasury holdings as part of a broader reduction in government debt exposure.
Table of Contents
- Norway wealth fund hit by rising bond yields
- Small equity gain masks sector differences
- Quarter follows record first-half profit
- Conclusion
Norway wealth fund hit by rising bond yields
The bond portfolio was central to the setback. Fixed income represents just over a quarter of the fund's investments, with holdings in 1,664 bonds across 51 countries. About 70% of that portfolio is allocated to government bonds and the rest to corporate debt.
Government bond yields climbed during a global third-quarter selloff as major central banks, including the U.S. Federal Reserve, began rate-hiking cycles, while concerns over inflation and government debt increased.
Deputy CEO Trond Grande described the fund's overall return as slightly negative and close to flat, attributing weaker fixed-income results to rising interest rates.
In September, NBIM said it wanted to reduce its U.S. Treasury holdings as part of wider plans to lower its allocation to government-issued debt. That was a stated intention, rather than confirmation that the reduction had been completed.
Small equity gain masks sector differences
Stocks account for 72% of the fund's portfolio, spread across roughly 7,100 companies. Its holdings include a $65.4 billion stake in Nvidia, alongside positions in Apple, Alphabet and Microsoft.
The equity portfolio returned 0.5% during the quarter. Grande said energy companies performed best, while interest-rate-sensitive utilities and real estate companies declined. According to NBIM, rising oil prices as the U.S.-Iran war continued supported energy stocks. The fund holds stakes in Exxon Mobil, Shell and Chevron.
U.S. stock benchmarks also finished the quarter unevenly: the S&P 500 gained 2.03% and the Nasdaq Composite rose 2.2%, while the Dow Jones Industrial Average fell 1.9%.
Quarter follows record first-half profit
The latest result contrasts with the fund's 12.95% return and record profit of nearly $185 billion in the first half. Over the summer, CEO Nicolai Tangen said investors should not expect the same level of returns to continue.
Outside stocks and bonds, the fund's real estate investments returned 0.4% in the third quarter, while renewable energy infrastructure returned 7.5%. Norway established the fund in 1998 to invest the country's oil revenues.
Conclusion
The third-quarter loss marked a reversal from the fund's strong first half, with bond-market weakness outweighing modest equity gains and positive returns from real estate and renewable energy infrastructure.
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