Norway’s sovereign wealth fund (SWF) released headline annual results this morning showing the previous year’s high profits to have been wiped out by 2022’s investment losses – but its manager also declared record profits had been generated from outperformance.
The Government Pension Fund Global’s (GPFG) total assets actually increased to NOK12.4trn (€1.14trn) by the end of 2022 from NOK12.3trn a year before, despite an annual investment return of -14.1% or NOK1.64trn in 2022, according to the summary of annual figures published today.
That 14.1% investment loss comes directly after a year when the GPFG made a NOK1.58tn or 14.5% gain.
Losses for both fixed income and equities – the main components of the index-based GPFG – were wide in 2022 at 12.1% and 15.3%, respectively, while unlisted real estate generated a slim 0.1% return, and unlisted renewable energy infrastructure ended the year with a 5.1% positive return, according to Norges Bank Investment Management (NBIM), which runs the SWF.
Regarding 2022 results, Nicolai Tangen, NBIM’s chief executive officer, told an Oslo press conference this morning that in a year of the biggest losses on financial markets since the global financial crisis, there had been “no place to hide” for the SWF, which is invested in 9,000 companies around the globe.
“But who would have thought in a year like last year the value of the fund would stay unchanged, because that is what happened,” he said.
Trond Grande, deputy CEO at NBIM, explained that the fund’s value had been lifted by a weaker Norwegian krone and record inflows from the state’s petroleum revenue – which alone amounted to nearly NOK1.1trn.
Since the end of last year, however, the fund’s overall value has grown to NOK13.3trn today, according to the rolling figure displayed on NBIM’s home page.
Tangen told IPE the GPFG’s year-to-date returns were now more than 5%, with January’s investment gains coming from assets across the board, due to “a bounce in the US and Europe”.
IPE asked Tangen if NBIM was now potentially repeating its success following the global financial crisis, when it quickly recouped enormous losses by buying securities cheaply on a grand scale.
“We did have recovery in the second half [of 2022], and in the year to date the fund is up by more than 5%,” he said.
“We did deploy a lot of capital. We deployed all the inflows we had, so given that markets have recovered, it’s potentially one of those moments – but I just think it’s early days,” the CEO said.
Grande and Tangen told journalists that although the bank stayed close to the fund’s 70/30 equity/bond allocation mandated by the government, it also took a lot of active decisions generating excess returns.
Last year, the fund’s excess return reached a record of NOK118bn in absolute terms, although in percentage terms, at 0.88 percentage points, it was only ranked as the NBIM’s sixth best.
However, Grande said 2022 had been the first time that NBIM had outperformed at all in a loss-making year.
Regarding the overall investment environment, the deputy CEO said inflation affected all of NBIM’s investments. He added that US inflation had been higher in 2022 than for four decades.
Tangen said: “One of the issues we have a laser focus on is what could happen to global inflation when China is back on stream after the pandemic and the closedown they have had.”
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