Norges Bank generates 9.4% return in first half of the year

Norges Bank

While the firm’s investments in bonds and renewable energy infrastructure dropped, its real-estate holdings grew

Norway’s $1.4 trillion sovereign wealth fund, the world’s biggest, generated a 9.4% return in the first half of the year as its investments in energy, finance and technology companies helped drive double-digit gains in its stock portfolio.

Oslo-based Norges Bank Investment Management achieved almost 14% return on stocks, with energy investments up nearly 20%, it said.

While investments in bonds and renewable energy infrastructure dropped, its real-estate holdings grew. The fund’s total return, equivalent to nearly $110 billion, was marginally higher than that of the benchmark against which it measures itself.

Chief executive Nicolai Tangen has previously cautioned against expecting continued bumper returns.

Earlier this week, he said that inflation is now emerging as the biggest threat to returns with both stocks and bonds potentially vulnerable. That’s amid an ongoing debate as to whether price growth is “transitory” or becoming more entrenched. US inflation has been above 5% for the past two months, the highest in over a decade.

The strongest performance during the period was in sectors exposed more to inflation, such as energy, financials, materials, real estate and industrials, the fund said. What’s more, the highest returns shifted from growth stocks to value stock.

Meanwhile, the fund has been pushing through a broader shift in favour of North America over Europe, in pursuit of higher returns. On Wednesday, it revealed a 16.8% rise in the value of its technology holdings, which are dominated by stakes in Apple, Microsoft, Alphabet and Amazon. North American stocks returned 17% in the first half, and made up 45.2% of the equity portfolio.

The fund’s equity portfolio represented 72.4% of total assets at the end of June, which is marginally less than in Q1 and shows the investor has already had to reduce its stock-market exposure to avoid straying too far from its 70% mandate. Around five years ago, the fund was mandated to hold just 60% in stocks.

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