Norway Notes Record Loss

On Tuesday, Norway’s oil and state pension fund reported a record loss of 1.64 trillion Norwegian kroner, or $164.4 billion, for 2022. The fund’s investment return was minus 14.1 percent for the year, according to data from Norges Bank Investment Management (NBIM). The yield was 0.88 percentage points better than the benchmark index yield, equivalent to 118 billion kroner ($17.15 billion), reports Anadolu Agency.

“The market was affected by the war in Europe, high inflation, and rising interest rates,” said NBIM director Nikolai Tangen, adding that it negatively affected both the stock market and the bond market simultaneously, which is very unusual. Moreover, he added that “All sectors on the capital market had negative returns, with the exception of energy.”

The return on the fund’s equity investments was minus 15.3 percent in 2022 and 12.1 percent for fixed-income investments.

The Oslo-based fund, founded in 1996, had a value of 12.4 trillion kroner ($1.2 trillion) as of December 31, 2022.

The Norwegian currency weakened by more than 11 percent against the dollar last year.

Caution ahead

Norway’s sovereign wealth fund, the world’s largest, has warned that investors will face years of low returns as rising inflation becomes a permanent feature of the global economy. The CEO of the $1.3 trillion Norwegian Petroleum Fund, Nicolai Tangen, said inflation “could be stronger than what is generally expected.”

Consumer price inflation has been at its highest level in more than two decades in the world’s major industrial economies, especially in the US, where the annual pace of price growth reached seven percent in December and was 0.1 percent in May 2020. Strong demand and prolonged disruptions in supply chains are the main factors driving inflation.

Economists remain divided on whether the rise in inflation is temporary. Some believe the pandemic caused a short-term shock to supply chains, which then recovered with the economy. However, the shock will weaken over time. Market measurements of inflation expectations suggest that investors are not overly concerned about inflation.