MercoPress. South Atlantic News Agency

Norway’s sovereign fund, world’s second largest, lost 92 billion USD in 2008

Norway’s Government Pension Fund suffered a 633 billion kroner equivalent to 92 billion US dollars loss on its investments in 2008. The loss, which amounts to some 125.000 kroner for every Norwegian, came after a “sharp fall in global equity prices”, head fund manager Yngve Slyngstad said Wednesday.

Bond investments also underperformed as the fund's portfolio was “less well diversified” than expected, he said. The 330 billion US dollars fund is the world's second largest sovereign wealth fund after that of the United Arab Emirates.

It comprises two separate sovereign wealth funds, one of which invests Norway's oil earnings abroad.

“During the year, we saw a bank, credit and liquidity crises in the financial system, which has gradually come to encompass a crisis in the real economy,” Mr Slyngstad said.

The value of the fund's shares, which account for about half its portfolio, fell by about a fifth while the value of its bonds rose only slightly, up 1.6% during the year.

Mr Slyngstad's direct boss, Norwegian central bank governor Svein Gjedrem said “the financial crisis has revealed weaknesses in our active management”.

“The global financial crisis in 2008 presented major challenges to all parts of the portfolio of the Government Pension Fund – Global; the result for the year was the weakest in the fund's history and has led to a number of changes in the implementation of the investment strategy. The long-term strategy is unchanged”, it added.

Mr Slyngstad's salary will be reduced this year to 3.5m kroner from a salary and bonus package worth some 11m kroner last year.

However in spite of last year's investment losses, the value of the fund's international division, commonly known as the “oil fund”, nevertheless rose after fresh oil earnings were injected.

Some 384 billion kroner was injected into the oil fund after Norway, the world's fourth largest oil and gas exporter, saw its earnings soar on the back of record energy prices during summer.

Currency movements also counted in the fund's favour hence the Government Pension Fund of Norway's value rose to 2.275 trillion kroner by the end of the year from 2.120 trillion at the end of the July to September quarter.

As such, it owned 0.77% of all listed shares in the world at the end of 2008 and its average ownership in European companies rose to 1.33%, having purchased about 40% of its total equity portfolio during the course of 2008.