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Norway just lost 374 billion kroner, but is it a big deal?

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The Local/AFP - [email protected]
Norway just lost 374 billion kroner, but is it a big deal?
While the fund's most recent loss might seem like a significant setback, putting it into perspective is important. Photo by Jonathan Gong on Unsplash

Norway's sovereign wealth fund lost the equivalent of around 374 billion kroner (nearly $34 billion) in the third quarter of 2023, the country's central bank said on Tuesday. But how serious is that?

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The Norway Government Pension Fund Global, often called the oil fund, lost 374 billion kroner during the three-month period, with its value falling to the equivalent of 1.34 trillion dollars at the end of September.

"The stock market saw a weaker quarter compared to the two previous quarters," the fund's deputy chief, Trond Grande, said in a statement.

EXPLAINED: What does Norway do with its oil money?

"It was particularly the tech, industrials and consumer discretionary sectors which contributed negatively to the return," he added.

An appreciation of the Norwegian krone also crimped the fund's value.

No stranger to big losses

This isn't the first time the sovereign wealth fund recorded major losses.

In 2022, the fund reported a loss of 1,637 billion Norwegian kroner (164 billion dollars), citing volatile markets.

"The market was impacted by war in Europe, high inflation, and rising interest rates. This negatively impacted both the equity market and bond market at the same time, which is very unusual," Nicolai Tangen, CEO of Norges Bank Investment Management, which manages the fund, said in a statement in January 2023.

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But is it such a major deal?

While the fund's most recent loss might seem like a significant setback, putting it into perspective is important.

Firstly, the fund's performance is closely tied to the global financial markets, and like any investment portfolio, it can experience fluctuations.

For context, it's essential to know that the fund has successfully recovered losses incurred during volatile market periods.

The fund earned 131 billion euros in the first half of 2023, almost wiping out the huge 1,637 billion kroner loss incurred last year due to the war in Ukraine and the global economic downturn.

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The world's biggest wealth fund

Norway's wealth fund is the world's biggest, according to the Sovereign Wealth Fund Institute, just ahead of two Chinese funds.

Fuelled by revenues from Norway's state-owned oil and gas companies, the fund is aimed at financing future spending in the generous welfare state.

With just over 70 percent of its funds invested in shares, it holds equity in more than 9,000 companies and holds, on average, 1.5 percent of listed companies worldwide.

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