“Norway has the world’s largest sovereign wealth fund, but no gold reserves. Sold it all in 2004!”
The stock market crash around the world, triggered by coronavirus pandemic, has led to unprecedented losses for the world’s biggest sovereign wealth fund.
According to Bloomberg, Norway’s sovereign wealth fund lost $113 billion in the first quarter. The fund has generally used stock market declines or even bear markets to buy the dip. But maybe this time is different: The fund is offloading assets to cover emergency spending that the government needs to combat the virus.
As a whole, the fund lost 14.5% last quarter, clawing back some losses after a monster rip in global stocks last week. Still, its stock portfolio was down 21.1% over the period, with a slight gain in fixed income investments of 1.3%.
“The market situation is very challenging,” said Yngve Slyngstad, CEO of Norges Bank Investment Management (NBIM). “However, the fund has a long-term horizon.”
The virus situation in Norway is quickly deteriorating. There are now 4,848 positive cases and 44 people dead. What’s concerning health officials is that with increased cases, more and more people need hospitalization, which is straining the country’s healthcare system.
With its equity portion of the fund falling five percentage points below the 70% target, the fund will need to rebalance. Slyngstad said in the last week of March that rebalancing would likely happen through selling bonds rather than buying stocks.
The government withdrew $6.49 billion from NBIM last quarter as the virus crisis worsened in March.
We noted last week that traders were waiting for a rebalancing of sovereign pension funds such NBIM to buy the stock market dip and force a V-shape recovery, but we are finding out this week, that might not be the case.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of The Duran.