Oil Fund lost billions in 2018

“No reason to worry,” says fund’s governor

Oil Fund

Image: Asian gweilo / Wikimedia Commons

Pieter Wijnen
Norway Today

The Global Pension Fund of Norway (aka the oil fund) experienced a negative yield of 6.1 percent last year, corresponding to a loss of NOK 485 billion. The loss is, by comparison, about 50 times the size of what Norwegians paid in road tolls in 2018. It is the second largest loss in the history of the fund—both in value and as a percentage—with the exception of the financial crisis year, 2008. At that time, the investments dropped by as much as 23.3 percent, in what is seen as an exceptional year.

Turmoil in the stock markets led to the fund’s rare decrease. Equity investments had a negative yield of 9.5 percent, enough in itself to bring it into the red. Real estate investments dropped by 7.5 percent, while interest-rate investments rose by only 0.6 percent.

“No reason to worry”

Still, there is no reason to worry, says governor of the Central Bank of Norway Øystein Olsen and head of the Norges Bank Investment Management Yngve Slyngstad when they presented the results. The oil fund invests in a very long perspective, and has, therefore, taken into account large fluctuations in value and yield.

“In 2017, we delivered a very good result, with a yield of nearly 14 percent. With a weak result last year, we have the same message as then; the executive board is prepared for significant fluctuations from one year to the next, and results must, therefore, be assessed over time,” Olsen explains.

“In such a perspective, the fund has done well, both in absolute and relative terms,” Olsen continues. He highlights that the oil fund has had an average annual yield of 5.5 percent over the last 20 years. The yield has been 4.7 percent over the past five years, while the 10-year perspective shows 8.3 percent.

Has recouped the loss

Slyngstad points out that strong development so far this year has helped to recover the entire loss from last year. The total value of the fund is now several hundred billion more than just two months ago.

The oil fund owns a small share in a total of 9,146 companies worldwide, including large companies such as Apple, Nestlé, Microsoft, and Samsung. On average, the fund owns 1.4 percent of all listed companies in the world. The three largest holdings are all in U.S. technology companies.

Of the individual companies, Microsoft and Amazon contributed the most to the yield, while sectorally, the health segment contributed the most. The sectors of industry and materials dragged it down the most.

This article was originally published on Norway Today.

This article originally appeared in the March 8, 2019, issue of The Norwegian American. To subscribe, visit SUBSCRIBE or call us at (206) 784-4617.

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