The world’s largest sovereign wealth fund posted its biggest loss in four years, just as the Norwegian government prepares to make its first ever withdrawals to plug budget deficits.
The fund lost 273 billion kroner ($32 billion) in the third quarter, or 4.9 percent, as stocks declined 8.6 percent and bonds rose 0.9 percent, the Oslo-based fund said on Wednesday. Real estate holdings rose 3 percent. It was the first back-to-back quarterly loss in six years.
“We have to expect fluctuations in the value of the fund when there are large movements in the market,” Yngve Slyngstad, chief executive officer of the fund, said in a statement. “With the fund as big as it is today, this can have a considerable impact in the short term. The fund has a long-term horizon, however, and is in a good position to ride out short-term volatility.”
The period was marked by turbulence as worries of a China slowdown and prospects of a U.S. rate increase wiped trillions of dollars off the value of global markets. The MSCI World Index lost 9 percent while the MSCI Emerging Markets Index plunged 19 percent in the quarter. The selloff was exacerbated by a rout in commodities.
The fund had a loss of 21.3 percent on Chinese stocks in the period and 16.6 percent on its emerging market equities.
Norway’s $860 billion fund, which has grown more than six-fold amid a boom in oil prices over the past decade, is facing a new era as cash injections may come to a halt as soon as next year.
Budget documents released this month showed the government will withdraw about $440 million next year as it uses up all its direct oil revenue to cushion the economy from a 50 percent drop in crude prices.
The shift comes as Slyngstad warns of diminished returns held down by unprecedented monetary easing in the developed world.
The fund held 59.7 percent in stocks at the end of September, down from 62.8 percent in June.
Bond holdings rose 37.3 percent from 34.5 percent and it held 3 percent in real estate. The fund is mandated by the government to hold about 60 percent in stocks, 35 percent in debt and 5 percent in properties.
The fund’s largest stock holding was Nestle and Apple. The biggest bond holdings were in U.S., Japan and Germany.
Inflows from the government were 12 billion kroner, compared with a 60 billion kroner quarterly average over the past 10 years.
