Norway’s $1-trillion sovereign wealth fund is on an 11-month winning streak

All about oil.
All about oil.
Image: Reuters/Nerijus Adomaitis
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Last month, Norway’s giant sovereign wealth fund announced that it had surpassed a big milestone: its assets reached $1 trillion. To get there, it enjoyed a 11-month-long streak of positive returns, its longest uninterrupted winning run since mid-2013.

Bonus fact: Since 1998, the fund has made a positive return in 160 out of 237 months. That’s almost 70% of the time.

In the third quarter of 2017, the fund returned 3.2%, or 192 billion kroner ($23.5 billion), it reported today (pdf). Most of the gains came from its stock holdings, which returned 4.3%. About two-thirds of the fund is invested in equities. Which equities? All the equities: At the end of 2016, the fund owned just over 1% of all stocks listed in the world.

Elsewhere in its portfolio, in the three months to September fixed-income investments returned 0.8% and real estate returned 2.7%.

Despite the fund’s good fortunes, its managers don’t want to get complacent. “We must be prepared for volatile stock markets, and can not expect such a return every quarter,” CEO Yngve Slyngstad said.

For now, the fund is benefiting from a surge in oil prices. The price of Brent crude oil, the international benchmark, has climbed 8% so far this year, boosting the profits of oil companies. In turn, oil and gas companies delivered the best return for the Norwegian fund in the third quarter, at 8.7%. Royal Dutch Shell was the single best-performing stock for the quarter, of which the fund owns more that $5 billion in shares.

It’s not all good news. While the fund reports in “international currency,” a basket of the 34 currencies in the fund’s benchmark indexes for stocks and bonds, once translated into Norwegian krone, things look less rosy. In the past quarter, the krone appreciated against major currencies, which decreased the value of the fund by 250 billion kroner, cancelling out the positive returns from its investments in other currencies.