World's largest sovereign wealth fund posts $34bn loss in Q3
The world's largest sovereign wealth fund, Norway's $1.4 trillion Government Pension Fund Global, has reported a loss of 374 billion Norwegian kroner (around $34 billion) in Q3 2023. Despite a -2.1% return on investment for the July-September period, the fund's performance was still 0.17 percentage points better than its benchmark index. Deputy CEO Trond Grande attributed the downturn to increasing interest rates and a weakening economy.
Losses across all asset classes
During the third quarter, the fund experienced losses in all asset classes. Equities, which made up 70.6% of the fund's value, suffered a 2.1% loss. Fixed-income investments saw a 2.2% decline, while real estate assets dropped by 3.3%. Grande expressed concern about growth being "really concentrated on a few super large US tech companies" and noted that equities have outperformed other asset classes over the past year.
Impact of rising interest rates and fiscal policies
"When the interest rates rise this much and this fast, obviously there's going to be businesses that need to refinance and finance themselves on higher rates. And the question is if all are well positioned to do that with the profitability," said Grande. However, he did not believe there was a greater risk of market correction compared to three months ago.
Limited exposure to Israel and regional conflict concerns
In relation to the Israel-Hamas war, Norway's sovereign wealth fund has minimal exposure, with only 0.1% of its investments in Israel, equivalent to 20.4 billion crowns. The fund has not altered its investment strategy in the region but is keeping a close eye on the situation, per Reuters. Grande expressed concern about the possibility of the war escalating into a "bigger and more regional conflict," which could affect global markets.
