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Norway's giant oil fund sees biggest loss in 4 years

Norway's sovereign wealth fund, the largest in the world by assets, reported a loss in the third quarter of this year as the global sell-off in risk assets hit the fund's equity holdings.

The fund saw losses of 4.9 percent in the three months to September, or 273 billion Norwegian crowns ($32.17 billion), according to its results posted on Wednesday morning. This marked the $825 billion fund's third weakest result – measured in its domestic currency - since its launch in 1990. It was also its worse result since October 2011 when it returned -8.8 percent, which it also blamed on tumbling stock markets.

A visitor looks out towards a flare stack on the Oseberg A offshore gas platform operated by Statoil ASA in the North Sea 140kms from Bergen, Norway.
Kristian Helgesen I Bloomberg via Getty Images
A visitor looks out towards a flare stack on the Oseberg A offshore gas platform operated by Statoil ASA in the North Sea 140kms from Bergen, Norway.

Norges Bank Investment Management, the division of Norway's central bank that runs the sovereign wealth fund, said Wednesday that large market movements - such as those seen over the summer - were bound to impact the fund, given its size.

"The negative return on equity investments was driven by the slowdown in the global economy and the decline in global equity markets, especially the Chinese market," said Yngve Slyngstad, CEO of Norges Bank Investment Management, in the accompanying press release Wednesday.

"With the fund as big as it is today, this (market fluctuation) can have a considerable impact in the short term. The fund has a long-term horizon, however, and is in a good position to ride out short-term market volatility," he added.

The fund - which invests via the revenues made from the country's oil – saw its equity investment return -8.6 percent over the quarter, while its allocation to bonds returned 0.9 percent and real estate contributed 3 percent in returns.

The fund has 60 percent of its assets in equities, with huge stakes in Nestle, Apple, pharmaceutical firms Novartis and Roche, as well as Royal Dutch Shell, HSBC and BlackRock.

Around 35 percent of the fund is in fixed income, with the remaining 5 percent in real estate.

Volkswagen hurt the fund's performance after the group saw its share price collapse in the wake of an emissions testing scandal.

The German carmaker also reported third quarter earnings on Wednesday and saw its first quarterly loss for 15 years. The results were slightly worse than analysts' forecasts and anticipated hefty payouts to consumers around the world over the deceptive data on its diesel emissions.

The Norwegian fund had a stake of 1.22 percent in the automaker, worth $1.3 billion, as of December 31, 2014.

Glencore was another big loser for the fund. Fears of unsustainable debt levels and worries about the strength of China's economy sent the commodity firm's stock price to a record low in September.

The fund had a stake of 1.88 percent in Glencore, worth $1.1 billion, as of the end of last year.