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OIL FUND

Oil fund makes every Norwegian a millionaire

A bumper 2013 for Norway's sovereign wealth fund, which invests surplus oil revenue, has made every Norwegian a virtual millionaire in kroner.

Oil fund makes every Norwegian a millionaire
Wads of 100 kroner notes - Photo: Norges Bank
After posting its second best year, Norway's so-called "oil fund" — the world's largest — signalled a shift away from fossil fuels, notably over environmental concerns.
   
The fund's market value rose $200 billion last year to top 5 trillion kroner, according to figures released by the central bank on Friday.
   
That almost makes every single one of the Nordic country's 5.1 million inhabitants a millionaire in the local currency, at least on paper.
   
Translated into dollars, it means the fund holds around $165,000 per capita.   Despite its name, the Government Pension Fund of Norway is actually saving to guarantee the continuation of its generous welfare benefits for future generations.
   
Yngve Slyngstad, the oil fund's chief executive, said 2013 was "a good year" in terms of financial performance.
   
"2013 saw a return to lower uncertainty in the financial markets but also a weak growth of the world economy," Norway's central bank chairman Øystein Olsen said.
 
"Paradoxically, this weak growth and the low interest rates abroad are probably the main reasons for the fund's good results in the last two or three years."
   
According to the Sovereign Wealth Fund Institute, the  Norwegian fund is the largest in the world, followed by a fund owned by the United Arab Emirates.
   
Started in the 1990s, the fund has shares in 8,213 companies around the world and owns 1.3 percent of global market capitalisation, including 2.5 percent of all European shares.
   
Due to extremely low interest rates throughout the world, bond investments (37.3 of the portfolio) gave no return, while real estate investments in Europe and the US, turned in 11.8 percent.
 
   – Divesting from fossil fuels? –
 
The fund's portfolio could be facing changes in the near future however, moving away from the very source of its wealth.
   
The ruling minority right-wing coalition agreed Friday with two small centre-right ally parties to set up an independent panel of experts to examine the possibility of divesting from oil, natural gas and coal.
   
It was not clear whether any pull-out would affect all fossil fuel extraction companies or only target those where it is the main activity.
   
It was also unclear whether power companies would be included.
   
"It is important to look at this issue from every angle before going ahead with changes," said Svein Flåtten, finance spokesman for the conservative party.
 
The conclusions of the panel, expected next year, could radically change the fund's portfolio: 8.4 percent of its share investments are placed on oil and gas producers.
   
What may seem like a paradoxical initiative in a country that draws a quarter of its wealth from fossil fuels is explained by environmental concerns but also motivated by economic interest.
   
Several financial experts have claimed that the fund is doubly exposed to fossil fuels.
   
A price drop in the fossil fuel sector would mean less state money poured into the fund and also lower returns on the stock markets.
   
Last year, the fund's overall share return was significantly higher than the 16.1 percent the fund obtained from shares in oil and gas companies.
   
In December the opposition Labour Party first sparked a debate on the fund going greener when it proposed selling off its investments in "dirty" coal-based energy.
   
That would put the Norwegian state in a difficult situation, since it owns a company which extracts coal in the Arctic Svalbard archipelago, where it is an essential part of the local economy.
   
The fund already started selling stakes in coal and gold businesses due to "acute environment challenges", said Slyngstad, who added that the fund would continue to do so this year.

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OIL FUND

Norway oil fund loses 18 billion euros in first half of 2020

Norway's huge sovereign wealth fund, the world's biggest, lost 188 billion kroner (18 billion euros, $21 billion) in the first half of the year as the global economy reels from the Covid-19 pandemic, the central bank said Tuesday.

Norway oil fund loses 18 billion euros in first half of 2020
Unusually empty slopes and ski lifts in Hemsedal in April. Photo: AFP

The fund, in which the Norwegian state's oil revenues are invested, was hit by plummeting share prices, with stocks accounting for 69.6 percent of its investments.

Its share portfolio posted a negative return of 6.8 percent in the first six months of the year.

At the end of June, the fund was valued at 10.4 trillion kroner (989 billion euros), up from the 9.98 trillion kroner seen at the end of the first quarter.

“The year started with optimism, but the outlook of the equity market quickly turned when the coronavirus started to spread globally,” the fund's deputy chief executive, Trond Grande, said in a statement.

“However, the sharp stock market decline of the first quarter was limited by a massive monetary and financial policy response,” he added.

Real estate investments, which represent 2.8 percent of the portfolio, also posted a negative return, of 1.6 percent, while bond investments, which account for 27.6 percent of assets, posted a gain of 5.1 percent.

“Even though markets recovered well in the second quarter, we are still witnessing considerable uncertainty,” Grande said.

The fund is meanwhile still mired in controversy over the appointment of a new chief executive.

Nicolai Tangen, a billionaire who founded the AKO Capital hedge fund in London, is due to take over the fund on September 1st, replacing Yngve Slyngstad who is retiring.

But critics have complained about Tangen's possible conflicts of interest, as well as his use of tax havens.

The central bank has meanwhile been criticised for irregularities in the recruitment process.

As a result, some major political parties are opposed to Tangen's appointment, and it remains up in the air.

READ ALSO: Norway's oil fund loses 1.3 trillion kroner ($125bn) in coronavirus crash

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