Norway's Oil Fund Posts Flat Returns in 3Q

OSLO--Norway's oil fund, the world's biggest sovereign wealth fund, reported a 0.1% profit on its investments in the third quarter, as a loss on its equity investments was offset by a fixed-income gain, and said geopolitical uncertainty was hurting European stocks while U.S. stocks gained.

Norges Bank Investment Management, the arm of the central bank that manages the fund, said Wednesday that earnings on its investments totaled 15 billion Norwegian kroner ($2.27 billion). The total value of the fund on September 30 was NOK5.534 trillion.

Equity investments lost 0.5% in the third quarter, while fixed-income investments gained 0.9%, NBIM said. U.S. shares contributed positively, while European shares contributed negatively, NBIM said.

"Two quarters of strong returns were followed by a virtually flat quarter," said NBIM Chief Executive Officer Yngve Slyngstad. "Increased geopolitical uncertainty in the vicinity of the euro area contributed to a negative return on European stocks. The U.S., on the other hand, emerged as the global growth engine, and U.S. stocks produced a positive return," he added.

Health-care and technology stocks were the best performers, NBIM said. The weakest performers were oil and gas companies, amid a sharp drop in oil prices. Among individual stocks, technology companies Apple and Microsoft and drugmaker Novartis contributed the most to the fund's third-quarter earnings. The most negative contribution came from retailer Tesco, chemical company BASF and carmaker Daimler.

The management said the oil fund, also known as the Government Pension Fund Global, had increased its holdings of bonds issued by Japan, India and Austria, and decreased its holdings of bonds issued by the U.S., France and Germany.

Some 78.6% of fixed income investments at the end of the quarter were denominated in dollars, euros, yen and sterling, compared with 77.8% at the end of the second quarter, the fund said.

Around 61.4% of the fund's investments were in equities, 37.3% in fixed income assets and 1.3% in real estate at the end of the quarter.

The krone weakened against many of the main currencies during the quarter, increasing the fund's value by NOK5 billion. The government transferred NOK36 billion in new capital to the fund.

The Norwegian oil fund was set up in the 1990s to act as the main investment vehicle for Norway's vast oil wealth. It has expanded more than 10-fold in the past decade and is expected to be worth NOK7.533 trillion by 2020.

Write to Kjetil Malkenes Hovland at [e-mail]

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