Norway's Oil Fund Lost $25 Billion in Second Quarter on Stock Slump, BP
BP Plc Macondo well site in the Gulf of Mexico
Derick E. Hingle/Bloomberg
The fund held 10.5 billion kroner in BP shares at the end of June.
The fund held 10.5 billion kroner in BP shares at the end of June. Photographer: Derick E. Hingle/Bloomberg
Norway’s sovereign wealth fund, the world’s second largest, lost 155 billion kroner ($25 billion) in the second quarter as the European debt crisis caused stocks to slump and BP Plc tumbled after the Gulf of Mexico oil spill.
The Government Pension Fund Global fell 5.4 percent in the quarter, the first drop since the start of 2009, as measured by a basket of currencies, the investor said today in Oslo. The fund, worth 2.79 trillion kroner, lost 9.2 percent on its stocks and returned 1 percent on its bonds.
“The second quarter was very turbulent with large challenges in the markets and large uncertainty regarding nations’ financing and the government bond market,” Yngve Slyngstad, head of Norges Bank Investment Management, said at a press conference.
Europe’s largest stock investor was hurt as shares slumped on concern a debt crisis would spread from Greece and slow the region’s emergence from the global slowdown. The benchmark Stoxx Europe 600 Index fell 7.7 percent last quarter, its first quarterly drop since the rally in global equities began in March 2009. It has since risen about 5 percent as company earnings helped alleviate concern over global growth.
BP Loss
The fund said its worst performer was BP, which tumbled 49 percent in the quarter after the spill accident in the Gulf of Mexico, followed by Nokia Oyj. The Finnish mobile phone maker slumped 42 percent in the quarter. The fund held 10.5 billion kroner in BP shares at the end of June.
“By the end of the second quarter we increased our exposure to BP and we are no longer underweight on the company as we were for the first half of the year,” Slyngstad said in an interview. The executive in a statement also urged the largest oil companies to lead an effort “to improve safety and environmental standards.”
Norway, a nation of 4.8 million people, generates money for the fund from taxes on oil and gas, ownership of petroleum fields and dividends from its 67 percent stake in Statoil ASA, the country’s largest energy company. Norway is the world’s second-largest gas exporter and the seventh-largest oil exporter.
The fund invests outside Norway to avoid stoking domestic inflation. It last year had a 26 percent return, recouping most of a record loss of 633 billion kroner in 2008.
Government Deposits
The government deposited 35 billion kroner of its petroleum revenue into the fund in the quarter, most of which went to fixed-income purchases. A drop in the krone added 149 billion kroner to the market value. The period’s return was in line with the benchmark set by the Finance Ministry, NBIM said.
The fund held 59.6 percent in stocks and 40.4 percent in bonds at the end of the quarter, cutting its stock holdings from 62.6 percent. It’s mandated to keep about 60 percent in stocks, 35 percent in bonds and this year got approval to invest as much as 5 percent in real estate, by reducing fixed-income. The fund had no property investments at the end of the second quarter.
Its largest stock holding at the end of June was in Nestle SA at a value of 19.2 billion kroner, followed by HSBC Holdings Plc and Royal Dutch Shell Plc. The fund holds 50 percent of its equity investments in Europe, 35 percent in the Americas, Africa and Middle East, and 15 percent in Asia and Oceania. The regions had losses of 12.3 percent, 7.5 percent and 3.5 percent, respectively, in the quarter.
European Loss
The largest bond holdings were in U.S. government bonds, at 141.6 billion kroner, followed by U.K. and German government bonds. The fund’s European fixed-income investments lost 3.4 percent in the quarter, while investments in the Americas gained 6.8 percent and Asian debt rose 9.6 percent.
“Fears of sovereign debt default in Europe affected the bond market and contributed to a decline in the value of the fund’s European bonds, which account for about 60 percent of the overall fixed-income holdings,” the fund said.
Only Abu Dhabi has a larger wealth fund, according to the Sovereign Wealth Fund Institute in California. A sovereign wealth fund is a state-owned fund with assets such as stocks, bonds and real estate.
-- With assistance by Meera Bhatia in Oslo. Editor: Jonas Bergman, Tasneem Brogger
Meera Bhatia at +47-22-99-6195 or mbhatia2@bloomberg.net
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