Norway’s sovereign wealth fund swelled in 2021

Norway's sovereign wealth fund, the world's biggest, grew even larger last year as it earned close to a whopping $180 billion thanks to its investments in US stocks, officials said Thursday.

An oil rig in Norwegian waters.
The Norwegian sovereign wealth fund swelled last year. Pictured is a oil rig in Norwegian waters. Photo by Jan-Rune Smenes Reite from Pexels

The gains of almost 1.6 trillion Norwegian kroner ($177 billion, 158 billion euros) represented a return of 14.5 percent. The fund — which the country funnels its oil revenues into — ended the year with a colossal total value of 12.3 trillion kroner.

Central Bank Governor Oystein Olsen described it as “a quite rewarding year”.

This is the fourth best annual percentage return in the history of the fund, which was set up in the 1990s, and the second best in absolute terms.

But the central Norges Bank, which manages the fund, cautioned that such results could not be expected in the future.

“We have to be prepared for downturns,” said Trond Grande, deputy chief executive for Norges Bank investment management.

READ ALSO: Why is Norway such a wealthy nation?

Stocks, which accounted for 72 percent of the total portfolio at the end of December, gained 20.8 percent, driven in particular by the US and the energy, finance and technology sectors.

Microsoft, Alphabet (Google’s parent company) and Apple were the top three companies contributing to the fund, with gains of 78 billion, 64 billion and 61 billion kroner respectively in 2021. The fund has stakes in more than 9,000 companies.

Stock markets have fallen sharply since the beginning of the year in the face of inflationary pressures and the prospect of rising interest rates, coupled with uncertainty tied to the standoff between NATO and Russia over Ukraine.

The fund’s bond investments, which account for 25.4 percent of assets, suffered a negative return of 1.9 percent as interest rates remained low in 2021. Real estate investments, accounting for 2.5 percent of the portfolio, gained 13.6 percent, while unlisted renewable energy projects, the fourth asset class although only marginal, posted a return of 4.2 percent.

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Tough start to the year for Norwegian and Swedish economies

The economies of Norway and Sweden contracted in the first quarter of the year, weighed down by Covid restrictions, official statistics showed on Friday.

Tough start to the year for Norwegian and Swedish economies

But the two Scandinavian countries are still expecting robust growth for the year as a whole, despite the conflict in Ukraine and the tough start to 2022.

Sweden’s gross domestic product fell by 0.4 percent in the first quarter compared with the last three months of 2021, according to its SCB statistics agency.

Norway’s GDP fell by 0.6 percent, excluding hydrocarbon production and maritime transport, its SSB statistics service said.

The solid recovery seen in March, with growth of 1.0 percent in both countries, was not enough to erase the decline due to the Omicron variant at the very start of the year, when Covid restrictions were still in place.

READ ALSO: What the revised national budget in Norway means for foreigners

The Norwegian government expects vigorous growth in 2022, though it brought its estimate down slightly on Thursday in a revised draft budget — to 3.6 percent from the 3.8 percent previously expected.

The Bank of Norway has already raised its key rate three times since September, and has hinted at several more hikes in the coming months.

Its Swedish counterpart also began tightening monetary policy in April, pushing its rate above zero for the first time since September 2014.

The Swedish government expects growth of 3.1 percent for the year as a whole.