Norway’s $1.3tn oil fund has staged a recovery in the first month of 2023 after its worst year since the global financial crisis, underscoring the strong rally in global markets in the opening month of 2023.
The world’s biggest sovereign wealth fund has gained 5 per cent so far in 2023, chief executive Nicolai Tangen told a press conference on Tuesday.
“It’s potentially one of those moments,” he said, referring to the rebound in 2009 after the financial crisis, “but the outcome this year is more uncertain than normal.”
The upbeat start to the year comes as stocks and bonds have climbed after taking a bruising in 2022 as investors bet inflation has peaked and central banks are near the end of their rate-rising cycles.
The fund has also reduced its positions in the troubled Adani group of companies due to risks such as potential corruption, environmental damage and human rights abuses, Tangen said.
The fund had holdings as of Monday of about $200mn in Adani companies, compared with its weight in the fund’s index of about $800mn. Tangen’s remarks come after short seller Hindenburg Research released a report last week alleging Adani Group had engaged in stock manipulation and accounting fraud. Adani has rejected the allegations as baseless and threatened legal action against Hindenburg.
The fund in 2022 had an annual return last year of minus 14.1 per cent, or NKr1.6tn ($159bn). It marks its worst performance on per cent basis since 2008 and the biggest fall in kroner terms on record.
“There is just nowhere to hide,” Tangen said. He referred to Russia’s full-scale invasion of Ukraine, high inflation and rising interest rates that led to the “very unusual” scenario of both equity and bond markets being hit simultaneously.
Tangen, a former hedge fund manager, has repeatedly warned of the possibilities of low or negative returns for the next decade as the era of zero interest rates and low inflation has come to an abrupt end. The oil fund is one of the world’s most influential investors, owning on average 1.3 per cent of every listed stock globally.
The fund said it outperformed its benchmark index, set by Norway’s finance ministry, by 0.88 percentage points.
Technology companies dragged the fund down more than any other sector last year. The worst performers of all the fund’s equity investments were Amazon, Meta, Tesla, Alphabet and Apple as a result of the sell-off in big tech companies that led the pandemic-era rally in 2020-21.
One of the few bright spots were energy companies, with ExxonMobil, Chevron, TotalEnergies and Shell and drugmaker Novo Nordisk the leading performers for the fund in 2022.
Equities had a negative return of 15.3 per cent, bonds lost 12.1 per cent while property eked out a 0.1 per cent gain.
“It’s a long-term investment fund . . . so we should expect, and we are prepared for, short-term losses. That is what we should be able to bear to stick with our strategy of the highest possible return in the long term,” said Trond Grande, the fund’s deputy chief executive.
However, the fund as a whole did not shrink in 2022 despite the large negative return as massive inflows from Norway’s oil and gas revenues, boosted by Russia’s war against Ukraine, were at record levels.
Norway has faced charges of being a “war profiteer” as its petroleum revenues, all of which are put in the fund, have soared as the Scandinavian country displaced Russia as the biggest supplier of gas to the EU.