Norway’s $2.3 Trillion Wealth Fund Posts $30 Billion Loss as Bonds Slide

Norway’s sovereign wealth fund, the largest in the world, reported a $30 billion investment loss in the third quarter after rising interest rates hit its bond holdings. Norges Bank Investment Management (NBIM), which manages the $2.3 trillion fund, said Thursday that the accounting return for the period was a loss of 278 billion kroner ($29.7 billion).

The fund’s fixed income investments delivered a negative return of 3.5%, a key driver of the overall downturn. Around 70% of NBIM’s fixed income portfolio is allocated to government bonds, with the remainder in corporate debt.

Bond rout hits returns

The third quarter saw a global bond market rout. Government bond yields surged as major central banks, including the U.S. Federal Reserve, began rate-hiking cycles and concerns about inflation and government debt levels mounted.

Fixed income accounts for just over a quarter of the fund’s entire portfolio. NBIM is invested in 1,664 bonds across 51 countries. Last month, the fund said it wanted to cut its U.S. Treasury holdings as part of wider plans to reduce its allocation to government-issued debt.

“The fund’s return was close to flat, ending slightly negative as rising interest rates led to weaker results on our fixed-income investments,” NBIM’s Deputy CEO Trond Grande said in a statement.

Equities offer little cushion

Equities, which account for 72% of the sovereign wealth fund’s investments, returned 0.5% in the third quarter. The fund has small stakes in around 7,100 companies across most countries. With holdings in 1.5% of all listed companies globally, it is the world’s largest single investor.

Stock markets were turbulent in the three months to September. Wall Street’s major averages ended the third quarter in mixed territory. The S&P 500 index added 2.03%, while the Dow Jones Industrial Average fell 1.9% and the tech-heavy Nasdaq Composite ended the quarter 2.2% higher. The average change across the three indexes was just 0.6%, marking a slowdown in the rally that saw double-digit gains in the previous quarter.

NBIM is an investor in America’s biggest companies, with top holdings including a $65.4 billion stake in one of them.