Uncertainty about global trade and economic growth dampened the returns of Norwegian Government Pension Fund Global over the second quarter of this year, says Trond Grande, Deputy CEO of Norges Bank Investment Management.
"But markets rallied towards the end of the period, driven partly by the prospect of more expansionary monetary policy in developed markets,” Grande adds.
The gigantic fund, with assets under management totaling NOK 9,162 bn (EUR 921bn), published its results Wednesday. Inflows into the fund amounted to NOK 6bn (EUR 603m) during the period. The portfolio, a lion's share of which was invested in equities, yielded a total return of 3.0 percent over the quarter.
Equity investments yielded a return of 3.0 percent. Over the first half of this year, the fund's exposure to the asset class increased from 66.3 percent to 69.3 percent. European shares returned the healthiest returns, 4.1 percent. The UK, which was the fund’s largest European market with 8.7 percent of equity investments, however, pulled in a return of mere 0.9 percent.
North American stocks, on the other hand, yielded a return of 3.6 percent and amounted to 41.8 percent of the fund's equity portfolio. Emerging markets, which make some 11.1 percent of the fund's equities, yielded a return of 0.6 percent. The Chinese stock market, home to 3.8 percent of the fund’s equity investments, pulled in a return of -4.0 percent.
Unlisted real estate, which constitutes 2.7 percent of all holdings, yielded 0.8 percent. Fixed income investments declined from 30.7 percent to 28 percent over the first half and pulled in a return of 3.1 percent.
“We had a positive return on our fixed-income investments thanks to falling yields,” says Grande. “We now have more than NOK 600bn in bonds with negative yields. That is equivalent to a quarter of our fixed-income portfolio, and in line with the markets,” he says.
The Norwegian krone appreciated against several of the main currencies during the quarter. All in all, currency movements decreased the value of the fund by NOK 38bn.