Norwegian pensioners lost 73 billion kroner ($8.8 billion) in the second quarter.
Norway’s pension, which is the world’s largest sovereign fund, posted a 0.9 percent decline. The first loss in three years occurred due to artificially low interest rates, falling returns on United States stocks and very weak bond markets.
In order to raise money for pensions and various other government expenditures, the Norwegian government placed much of its oil revenues into the fund. It was a gamble that didn’t pay off.
The pension fund had been heavily invested in U.S. and European markets, but the second quarter decline came as the turmoil in Greece continues and the debate surrounding the Federal Reserve’s indecision over interest rates persists. Very low interest rates also hit the fund’s returns on sovereign bonds.
Moreover, Norway’s fund has access to China, particularly in mining and real estate, but the slowdown has also contributed significantly to its decline.
The pension fund is reported to own about one percent of the world’s stocks with a market value of more than $863 billion. About one-fifth of the pension fund is invested in U.S. stocks.
Negative returns on its U.S. investments were the biggest factor to the overall downturn. The government lost 3.4 percent on its $55 billion investment in U.S. treasuries and an additional 1.4 percent in U.S. stocks.
“The return on fixed-income investments was affected by an increase in yields in the fund’s main markets,” said Yngve Slyngstad, CEO of Norges Bank Investment Management, the fund’s money manager, in a statement accompanying the financial update. “On the equity side, U.S. stocks pulled down the result.”
A stronger Norwegian kroner against other major currencies in the second quarter also seriously affected the pension’s fund.
Officials did not mention anything about falling oil prices and its affect on its revenues.
Between 1998 and 2014, the pension fund has posted 5.8 percent in annual returns.
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