Norway’s giant sovereign wealth fund lost NOK85bn (€9.2bn), or 0.6%, in the first three months of this year, with investments in two of the fund’s three asset classes shrinking in overall value during the the period.

According to its first-quarter report, the Government Pension Fund Global’s (GPFG) equity investments made a loss of 2.9% between January and March, fixed income assets a positive return of 3.3% and property investments a loss of 1.3%.

Trond Grande, deputy chief executive at Norges Bank Investment Management (NBIM), which manages the fund, said: “The first two months of 2016 were characterised by high market volatility and concerns for a Chinese slowdown.”

But the turbulence eased considerably in March, he said.

Grande said falling interest rates in the quarter resulted in price gains on the fund’s fixed income investments.

“However, lower interest rates have negative long-term implications for future returns on the fixed income portfolio,” he said.

NBIM said the quarterly return on equities and fixed income undercut the benchmark indices by 0.2 percentage points.

In a news conference, Grande explained this underperformance, saying it was due to the fact the GPFG’s bond holdings had a shorter duration than did the bond portfolio represented by the reference index.

On the equity side, he said underperformance in the three-month period was due broadly to differences between exposure in the fund’s external asset manager portfolios and the reference portfolio.

Differences between the fund’s exposure to the financial sector and that of the benchmark were particularly to blame for the underperformance, Grande said. 

During the quarter, the Norwegian government took money out of the GPFG for the first time.

Rules around the fund allow the government to take up to 4% of the fund’s investment return every year.

NBIM said the withdrawals amounted to NOK25bn in the first quarter.

Inflows to the fund – formerly known as the oil fund – from the country’s petroleum activities revenue have diminished, largely due to the collapse of the oil price.

The domestic currency’s strength on foreign exchanges in the first quarter, following a general weakening over the last two years, took its toll on the GPFG’s overall value.

Krone appreciation decreased the value of the fund by NOK286bn between January and March, NBIM reported.

At the end of March, the GPFG had a market value of NOK7.08bn, down from NOK7.47bn at the end of December 2015.

The fund’s equity allocation slimmed in the first quarter to 59.8% of the total portfolio from 61.2% at the end of December.

The fixed income allocation increased to 37% from 35.7%, while real estate held the same proportion at 3.1% of the fund.

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