World's Largest Sovereign Wealth Fund Loses $56B On Failed Stock Market Bets

Norway’s Government Pension Fund Global, the world’s biggest sovereign wealth fund, went on a stock buying binge during the global market turmoil in November and December 2018 and suffered accordingly.

The wealth fund lost $55.7 billion (485 billion kroner) last year on stock market bets that soured, said Norges Bank, the country's central bank on Wednesday. Norges Bank runs the Government Pension Fund Global, which was established in 1990 to invest surplus revenues of Norway’s oil sector.

Norges Bank blamed the 6.1 percent drop in the fund’s overall market value on volatile stock markets. It said the drop was the fund’s second worst yearly result ever. The loss of value in 2018 was a steep reversal from the 13.7 percent growth the fund saw in 2017.

“This is the first time that the fund has had a considerable decline in value,” said Yngve Slyngstad, the fund’s CEO, at a news conference on Wednesday. “The only other time was a slight decline in 2002.”

The U.S. stock market recorded its worst December since the Great Depression in December 2018. The Government Pension Fund Global took the opportunity to buy-up stocks on the cheap in accord with conventional investor wisdom.

During 2018, however, equity investments for the fund returned a loss of 9.5 percent. Unlisted real estate investments rose 7.5 percent while fixed-income investments returned 0.6 percent.

"Although performance was weak in 2018, the long-term return has been good and higher than the return on the benchmark index," said Oystein Olsen, governor of Norges Bank.

He said the fund’s equity investments, which represented 66% of the fund's portfolio, plunged 9.5 percent in 2018. Fixed-income investments slipped 0.6 percent, while investments in unlisted real estate rose 7.5 percent.

The Government Pension Fund Global has over $1 trillion in assets, including 1.3 percent of global stocks and shares.

The bank said the fund’s market value was $967 million on Dec. 31, 2018. On the same day, 66.3 percent was invested in equities, 3 percent in unlisted real estate and 30.7 percent in fixed income.

In 2018, the fund’s biggest equity holdings were in Microsoft ($7.5 billion), Apple ($7.3 billion), Alphabet ($6.7 billion), Amazon ($6.4 billion), Nestle ($6.3 billion) and Royal Dutch Shell ($6 billion).

The strong start to 2019 for stocks means the fund is currently valued at $1.03 trillion.