Russia tensions sting Norway oil fund

Published: Apr 30, 2014 8:51 a.m. ET




Norway's Government Pension Fund Global--the world's largest sovereign-wealth fund--returned a drab 1.7% in the first quarter, stung in part by its holdings of Russian bonds and Chinese stocks.

The returns were the lowest for the oil fund since the second quarter of last year, it said in a report Wednesday.

The 5.1 trillion kroner ($849 billion) fund saw its equity investments--which make up almost two-thirds of its holdings--return 1.5%, while fixed-income investments delivered returns of 2%.

Equity returns were hampered by losses in China, where stocks lost 6.1% on the back of poor economic performance. China accounted for 2.4% of the fund's equity position and was its largest emerging-market holding.

European shares--which make up almost half of the fund's equity holdings--returned 2.4%. Those returns were held back by European companies' exposure to emerging markets, the report said.

Bond returns were crimped as Russian debt prices fell amid the tensions with Ukraine. The value of its Russian government bondholdings lost 9.7%. The fund's Russian holdings were worth 24.3 billion kroner at the start of the year--a small slice of its vast overall holdings.

"Returns have not been good for the Russian market in particular," said oil fund Chief Executive Yngve Slyngstad at an Oslo news conference, adding that the fund in addition to its bond holdings also had a substantial exposure to Russian equities, valued at about 22 billion kroner.

The fund increased its exposure to bonds denominated in emerging-market currencies in the first quarter. The biggest increase in holdings was in Brazilian, Turkish and Mexican government debt.

Other than government debt, the fund's biggest bond buys in the first quarter were issued by J.P. Morgan Chase & Co., the European Investment Bank and German development bank KfW.

The fund cut its exposure to U.S., German and Swedish government bonds. The U.S. remains its largest bondholding, followed by Japan and Germany.

Norway's oil fund was set up in the 1990s to act as the main investment vehicle for the country's oil wealth. It has expanded more than tenfold in the past decade and is expected to be worth 7.278 trillion kroner by 2020.

Kjetil Malkenes Hovland in Oslo contributed to this article.

Write to Ben Edwards at

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