KUALA LUMPUR (March 8): Norway's sovereign wealth fund returned negative 14.1% at the end of 2022, equivalent to 12.43 trillion kroner (US$1.16 trillion or RM5.24 trillion).

In its 2022 annual report released on Tuesday (March 7), the fund said it had a market value of 12,429 billion kroner at the end of 2022.

Its investments broke down into 69.8% equities, 27.5% fixed income, 2.7% unlisted real estate, and 0.1% unlisted renewable energy infrastructure.

The fund’s return before management costs was -14.1% in terms of the fund’s currency basket.

Norges Bank said equities returned -15.4%, bonds -12.1%, unlisted real estate 0.1%, and unlisted renewable energy infrastructure 5.1%.

Management costs amounted to 0.04% of assets under management.

Although the return was negative measured in the fund’s currency basket, the value of the fund in Norwegian kroner increased during the year.

This was because the krone fell against the currencies in which the fund is invested, and because new capital was added to the fund.

Norges Bank said 2022 brought greater geopolitical turmoil in the world and instability in global markets than "we have seen for a very long time".

It said this led to losses on both equity and bond investments.

Norges Bank Investment Management chief executive officer Nicolai Tangen said last year, equity markets had their worst year since the financial crisis in 2008, while rising interest rates also meant negative returns on bonds.

“All in all, an eye-watering US$30 trillion was wiped off the world’s stocks and bonds, or around 25 times the value of the fund.

“Being invested in pretty much the entire world, we have nowhere to hide in such times of trouble.

“Our accounts for 2022 show a negative return for the fund of 1,637 billion kroner, which is about the same as the entire Norwegian government budget,” he said.

Norges Bank said energy stocks were the best performers in 2022, with a return of 30.8%.

It said reduced supply and further strong demand for oil, gas and refined products, partly as a result of Russia’s invasion of Ukraine, led to increased revenue for energy companies.

The bank said technology companies produced the year’s weakest return of -31.4% after a strong return in 2021.

It said the increased demand for digital advertising, e-commerce and semiconductors during the pandemic had normalised, and mounting recession fears began to affect demand for software towards the end of the year.

Meanwhile, real estate companies generated the second-weakest return of -26.3%.

The bank said this can be explained partly by the sector’s sensitivity to rising interest rates and higher interest costs due to high levels of debt, and lower property values as a result of higher discount rates.

A weaker growth outlook also contributed negatively, it said.

Norges Bank said the fund was invested in 9,228 companies at the end of 2022, down from 9,338 a year earlier.

Its investments in energy companies Exxon Mobil Corp, Shell plc and Chevron Corp made the biggest contributions to the return for the year.

The worst-performing investments were in US technology companies Amazon.com Inc, Apple Inc and Meta Platforms Inc.