World’s largest sovereign wealth fund posts record $213 billion profit

The Norges Bank, Norway’s central bank, in Oslo, Norway, on Tuesday, Oct. 17, 2023.

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Norway’s giant sovereign wealth fund on Tuesday reported record profit of 2.22 trillion kroner ($213 billion) in 2023, supported by robust returns on its investments in technology stocks.

The so-called Government Pension Fund Global, one of the world’s largest investors, said the result marked its highest return in kroner ever, with the fund’s return on investment last year coming in at 16.1% for the year. That was 18 basis points lower than the return on the fund’s benchmark index.

It follows a record loss of 1.64 trillion kroner for the whole of 2022, which the fund attributed to “very unusual” market conditions at the time.

“Despite high inflation and geopolitical turmoil, the equity market in 2023 was very strong, compared to a weak year in 2022,” Nicolai Tangen, chief executive of Norges Bank Investment Management, said in a statement.

“Technology stocks in particular performed very well,” he added.

Norway’s sovereign wealth fund, the world’s largest, was established in the 1990s to invest the surplus revenues of the country’s oil and gas sector. To date, the fund has put money in more than 8,500 companies in 70 countries around the world.

Last year, Norges Bank Investment Management said its return on equity investments was 21.3%, its return on fixed income investments came in at 6.1%, while investments in unlisted real estate returned -12.4%.

The fund said a negative year for its unlisted real estate investments was due to rising interest rates and subdued demand.

The fund returned 3.7% on investments in unlisted renewable energy infrastructure in 2023.

At the end of last year, Norges Bank Investment Management said almost 80% of the fund was invested in equities, 27.1% in fixed income, 1.9% in unlisted real estate and 0.1% in unlisted renewable energy infrastructure.

When asked at a news conference about the geopolitical issues likely to affect stocks in 2024, Norges Bank Investment Management’s Tangen replied, “The thing is that you have geopolitical hotspots in a lot of places these days.”

“So, what are the ones that we need to look out for? Well, the tension between America and China is negative for economic growth and world trade. The fact that people are nearshoring more and moving production closer to home is an inflationary force,” he continued.

“We are seeing the effect of the geopolitical tensions in the Middle East through longer trading routes [and] higher freight costs. So, that’s negative. And, of course, the most scary geopolitical situations are the ones that you don’t know about, that haven’t happened yet.”

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