The stock market crash around the world, triggered by coronavirus pandemic, has led to unprecedented losses for the world’s biggest sovereign wealth fund.
According to Bloomberg, Norway’s sovereign wealth fund lost $113 billion in the first quarter. The fund has generally used stock market declines or even bear markets to buy the dip. But maybe this time is different: The fund is offloading assets to cover emergency spending that the government needs to combat the virus.
As a whole, the fund lost 14.5% last quarter, clawing back some losses after a monster rip in global stocks last week. Still, its stock portfolio was down 21.1% over the period, with a slight gain in fixed income investments of 1.3%.
“The market situation is very challenging,” said Yngve Slyngstad, CEO of Norges Bank Investment Management (NBIM). “However, the fund has a long-term horizon.”
The virus situation in Norway is quickly deteriorating. There are now 4,848 positive cases and 44 people dead. What’s concerning health officials is that with increased cases, more and more people need hospitalization, which is straining the country’s healthcare system.
With its equity portion of the fund falling five percentage points below the 70% target, the fund will need to rebalance. Slyngstad said in the last week of March that rebalancing would likely happen through selling bonds rather than buying stocks.
The government withdrew $6.49 billion from NBIM last quarter as the virus crisis worsened in March.
We noted last week that traders were waiting for a rebalancing of sovereign pension funds such NBIM to buy the stock market dip and force a V-shape recovery, but we are finding out this week, that might not be the case.
Here’s how social media is reacting to the news:
Norway’s sovereign wealth fund lost a record $113bn in Q1 2020
Another example that this is an insolvency crisis.
— The Sirius Report (@thesiriusreport) April 2, 2020
Norway has the world’s largest sovereign wealth fund, but no gold reserves. Sold it all in 2004!
— Alex Svanevik (@ASvanevik) April 2, 2020
NB! Norway Sovereign Wealth Fund lost USD 113 billion in Q1!!
This is why a centralised wealth fund is not a good solution, and why Maggie T’s decision to let the profits from N. Sea oil flow back into the economy through the market was a much better solution for UK economy.
— George Bowen (@Oxford100) April 2, 2020
The world’s biggest sovereign wealth fund is about to start liquidating assets. Norway is facing its worst economic shock in 50 years & needs to withdraw record amounts from its sovereign wealth fund. Source: Bloomberg *Exposure to Indian companies*
Pl give ur opinion
— SANGRAM PATIL (@SANGRAM74020769) April 2, 2020
Fri, 04/03/2020 – 03:20
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Author: Tyler Durden