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The Norwegian sovereign wealth fund, known for being one of the largest funds in the world, recorded a loss of a staggering 1.64 trillion kroner (164 billion dollars) in the year 2022. This record loss was attributed to the "very unusual" market conditions caused by the war in Europe, high inflation, and rising interest rates.
The Return on Investment
The authorities announced that the government pension fund had a return of -14.1 percent last year, a slight improvement of 0.88 percentage points compared to its reference or stock index. The CEO of Norges Bank Investment Management, Nicolai Tangen, stated in a statement, “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”. “All the sectors in the equity market had negative returns, with the exception of energy,” Tangen said.
"2022 was a truly dramatic year in the world. It affected financial markets and hence it also affects our global fund," deputy chief executive Trond Grande of Norges Bank Investment Management which manages the fund told a press conference.
"We had multiple different emergencies and crises at the same time. War in Europe, broader geopolitical tensions, rising inflation, rising interest rates, high energy prices and increased economic uncertainty," Grande added.
The Fund's History and Reach
The fund was established in the 1990s to invest excess oil and gas revenues, and its vast oil and gas reserves in the North Sea have been the foundation of its wealth. To date, investments have been made through the $1.3 trillion fund in more than 9,300 companies in 70 countries around the world.
The fund's previous largest loss was 633 billion kroner in 2008 amid the global financial crisis. The Norwegian sovereign wealth fund recorded a record loss in 2022 due to the unusual market conditions caused by the war in Europe, high inflation, and rising interest rates.
Despite this setback, the fund remains one of the largest in the world, having invested in over 9,300 companies in 70 countries.