Norway's $1 trillion sovereign wealth fund grows despite a volatile quarter for markets

Key Points
  • The world’s largest sovereign wealth fund returned 3% during in the second quarter of 2019.
  • The fund now contains more than $60 billion in bonds with negative yields.
Oil Platform at sunset, Norway
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Norway's $1 trillion rainy-day oil fund was boosted in the three months to June by choppy action in both the stock and bond markets.

The world's largest sovereign wealth fund returned 3%, or 256 billion kroner ($28.5 billion), to the country's pension pot during in the second quarter of 2019.

The fund had a market value of 9,162 billion kroner ($1.02 trillion) as at 30 June 2019.

Stocks, which now make up a record to 69.3% of the fund, returned gains of 3% — the biggest contributions coming from Microsoft, Nestle, and Facebook. The biggest drags included Google parent Alphabet and Intel Corp.

Except for oil and gas, all equity sectors made gains for the fund in a second quarter described by the investment manager Norges Bank as "volatile."

"Uncertainty about global trade and economic growth dampened returns early on, but markets rallied towards the end of the period, driven partly by the prospect of more expansionary monetary policy in developed markets," said Trond Grande, Deputy CEO of Norges Bank Investment Management in a statement Wednesday.

During the three months to June, the S&P 500 index rose 3.8%.

Unlisted real estate owned by the fund returned 0.8%, while fixed-income investments, which accounted for 28 percent of the fund at the end of June, yielded 3.1%.

"We had a positive return on our fixed-income investments thanks to falling yields," Trond Grande, deputy CEO of Norges Bank Investment Management said in a statement.

Bond prices move inversely to falling yields, meaning the regular coupon payment to Norges Bank fell but the asset value of the bond rose.

"We now have more than 600 billion kroner in bonds with negative yields. That is equivalent to a quarter of our fixed-income portfolio, and in line with the markets."

The fund invests in international securities in foreign currency. The bank said that currency movements decreased the value of the fund by 38 billion kroner during the quarter as the Norwegian crown appreciated against several main currencies.