OSLO, Aug 17 (Reuters) – Norway’s sovereign wealth fund, the world’s largest, posted a record loss of 1.680 billion Norwegian kroner ($174 billion) in the first half of 2022 as stocks and bonds were hit by fears of a global recession and runaway price inflation. .

The $1.3 trillion fund’s return on investment was negative 14.4% for the January-June period, which was still 1.14 percentage points ahead of its benchmark’s return.

The drop, led by a 28% plunge in the value of its tech stocks, was the largest of any six-month period in the fund’s 26-year history, although some losses have since been recouped as markets turned positive in July and August.

“The market has been characterized by rising interest rates, high inflation and war in Europe,” chief executive Nicolai Tangen of Norges Bank Investment Management, which manages the fund, said in a statement.

Tangen, which made the fund’s second-highest profit on record last year, has repeatedly warned of weak markets ahead and that the fund, which is only allowed to deviate slightly of its benchmark indices, would also decline. Read more

“It’s well within what you’d expect,” Tangen said of the first-half loss.

The biggest loss in its stock portfolio came from Facebook owner Meta Platforms Inc (META.O), where the value of the fund’s investment fell by 38 billion crowns, followed by Amazon (AMZN.O ) with 35 billion and Apple (AAPL.O). ) with 30 billion.

After surging as COVID-19 increased demand for online shopping and entertainment, tech and social media stocks have been hit by higher interest rates and competition between platforms for advertising budgets eaten away by inflation.

Founded in 1996, the sovereign wealth fund invests revenues from Norway’s oil and gas sector and holds stakes in more than 9,300 companies worldwide, owning 1.3% of all listed shares.

Its $1.3 trillion valuation is roughly equivalent to the size of Mexico’s economy, the 16th in the world by some measures.

The fund’s biggest percentage loss came in 2008, when the global financial crisis caused its value to drop 23% for the full year, although the size of the fund was considerably smaller at the time and the loss total amounted to 633 billion crowns.

All of the sectors the fund invests in posted negative returns in the first half, except for energy, where returns were 13% due to the spike in prices following the invasion of Ukraine by Russia.

Central banks have raised interest rates aggressively this year to fight inflation, which has led to higher borrowing costs and lower corporate profit margins.

The Nasdaq Composite (.IXIC) and the broader S&P 500 Index (.SPX) suffered their biggest January-June declines since the financial crisis, while US and European government bond markets saw their worst beginning of the year for decades. Read more

In total, 68.5% of the fund was invested in equities at the end of June, including 28.3% in bonds, 3.0% in unlisted real estate and 0.1% in unlisted renewable energy infrastructure.

($1 = 9.6716 Norwegian kroner)

Reporting by Victoria Klesty; Editing by Terje Solsvik, Mark Potter and Catherine Evans

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