The world’s largest sovereign wealth fund loses $174 billion in the first half, cites inflation and war in Europe

Norway’s sovereign wealth fund, the largest in the world, had a loss of 1.68 trillion Norwegian kroner ($174 billion) in the first half of 2022, as stocks markets more broadly saw a tumultuous six months.

The $1.3 trillion fund returned a negative 14.4% during the period, as stocks and bonds reacted violently to global recession fears and skyrocketing inflation. But the fund’s return was 1.14 basis points better than the return of the benchmark index, the country’s Norges Bank said Wednesday, equivalent to 156 billion kroner.

“The market has been characterised by rising interest rates, high inflation, and war in Europe. Equity investments are down with as much as 17 percent. Technology stocks have done particularly poorly with a return of -28 percent,” the CEO of Norges Bank Investment Management, Nicolai Tangen, said in a release.

The fund’s return on equity investments slipped 17%, while fixed income investments and unlisted renewable energy infrastructure were down 9.3% and 13.3%, respectively. 

Norway’s vast North Sea oil and gas reserves are the bedrock of the fund’s wealth. Energy was the only sector to not see negative returns after the fund made huge investments in wind power in recent years.

“In the first half of the year, the energy sector returned 13 percent. We have seen sharp price increases for oil, gas, and refined products,” Tangen added.

The loss is on trend with the U.S. stock market experiencing its worst first half since the 1970s. Inflation, interest rate hikes and war in Europe seriously dented the major U.S. indexes, with the Dow Jones Industrial Average losing more than 15% in the first six months of the year, the S&P 500 down over 20% and the Nasdaq Composite falling almost 30%.

Correction: Norway’s sovereign wealth fund had a loss of 1.68 trillion Norwegian kroner in the first half of 2022. An earlier version misstated the figure.