World's largest sovereign wealth fund lost $30 billion as rising rates hit bonds

Norway's sovereign wealth fund posted a loss of 278 billion kroner for the July-to-September period, as climbing borrowing costs cut into the value of its bond portfolio, Norges Bank Investment Management (NBIM) said on Thursday. The loss equals $29.7 billion.

The Government Pension Fund Global returned -0.5% in the quarter, 0.18 percentage points below its benchmark index. Fixed-income investments returned -3.5%, NBIM said, while equities returned 0.5%.

"The fund's return was close to flat, ending slightly negative as rising interest rates led to weaker results on our fixed-income investments," Deputy CEO Trond Grande said in a statement. "Equity returns were also close to zero, but there were large differences between sectors. Energy companies rose the most, while interest-rate-sensitive sectors such as utilities and real estate fell," Grande said.

The fund’s value fell by 670 billion kroner in the quarter to 22.01 trillion kroner on Sept. 30. A stronger krone reduced the value by 472 billion kroner, and 80 billion kroner was added after management costs.

Equities made up 72.1% of the fund at the end of September, fixed income 25.8%, unlisted real estate 1.6% and unlisted renewable energy infrastructure 0.5%. Real estate returned 0.4% and renewable energy infrastructure returned 7.5%.

Government bond yields climbed over the three months, following rate increases by several central banks, among them the U.S. Federal Reserve. Energy stocks gained ground as oil prices rose with the conflict between the U.S. and Iran still under way, NBIM said.

NBIM also has proposed cutting the government bond share of its portfolio from 70% to 50%. That shift would lower its U.S. Treasury holdings from 34.1% to 21.9% of its bond index. The Ministry of Finance has commissioned an expert group to assess the fund's overall strategy, with a report due by January 2027.