Late March this year, the Ministry of Finance submited the white paper The Government Pension Fund 2023 to the Storting (the Parliament). Topics in this year’s paper include how international economic and political developments may affect the Government Pension Fund Global, and a new review of the active management of the Government Pension Fund Norway. Learn more about Norway’s gigantic sovereign wealth fund 2022 – 2023.
2022 was a volatile year in the financial markets, among other things as a result of increasing inflation and tightening of monetary policy internationally. Return on the investments in the Government Pension Fund Global (GPFG) and the Government Pension Fund Norway (GPFN) was -14.1 pct. and -4.4 pct., respectively. This was, respectively, 0.87 and 0.71 percentage points higher than the return on the benchmarks set by the Ministry.
Despite weak markets, the market value of the GPFG increased with NOK 89 billion, to NOK 12 429 billion. This was due to significant revenues from the Norwegian petroleum sector deposited into the Fund and a weakening of the Norwegian krone (NOK). For the GPFN, market value at the end of 2022 was NOK 318 billion, a decrease of NOK 15 billion since the start of the year.
“The market was impacted by war in Europe, high inflation, and rising interest rates. This negatively impacted both the equity market and bond market at the same time, which is very unusual,” said Norges Bank Investment Management CEO Nicolai Tangen.
The first quarter 2023, however, shows a 5.9% return on investment.
Norway’s $1.4 trillion sovereign wealth fund, one of the world’s largest investors, on Friday posted a 5.9% return on investment for the first quarter boosted by rising equity markets. “It’s actually one of the strongest quarters we ever had,” Deputy CEO Trond Grande said in a video posted on LinkedIn.
“We have seen a strong increase in the value of the Fund over several years but have no guarantee that this will continue. Thankfully, we have competent and experienced people managing the Fund, combined with a long-term investment strategy that we must remain committed to, also in more challenging times. This will serve us all in the long run,” says Minister of Finance Trygve Slagsvold Vedum (Centre Party).
Related: Responsible Investing in Norway
Norway’s sovereign wealth fund was established in the 1990s to invest the surplus revenues of the country’s oil and gas sector.
Despite market turmoil in March 2023 amid concerns of a new banking crisis, equity markets provided the biggest boost for the fund, with a nearly 8% gain. Falling interest rates benefited its bond portfolio, which returned almost 3%.
The profit of 893 billion Norwegian crowns ($83.89 billion) contrasted with a loss of 653 billion a year earlier.
So far, it seems that Norwegians have no reason to worry.
Norway’s Gigantic Sovereign Wealth Fund 2022 – 2023, written by Tor Kjolberg
Feature image (on top): Norges Bank. Photo © UiO