Equities Killed Norway’s Sovereign Wealth Fund in 2018

The world’s largest sovereign wealth fund is suffering from a $56.6 billion ax wound.

A highly volatile stock market put a pretty severe hurt on Norway’s massive Government Pension Fund Global in 2018, bringing its assets below the $1 trillion mark.

The now $964.7 billion fund’s -6.1% returns were most hurt by the first and last quarters of the year, eliminating the 1.8% and 2.1% gains of Q2 and Q3. The results were 0.3 percentage points less than its benchmark, the fund’s second-worst performance since its 1998 inception (behind 2008’s -23.31% travesty).

Sliding stocks offset the better performances of unlisted real estate (7.5%) and fixed income (0.6%). The fund had gained 13.6% the year prior, which was driven by stocks.

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Equities were 66.3% of the fund’s investments on December 31, according to its 2018 annual report. Bonds and property investments make up 30.7% and 3% of the portfolio. Stocks returned 19.4% in 2017, when the Government Pension Fund Global’s strategic allocation was raised to 70%.

“Broad-based acceleration in the global economy in 2017 was followed by weaker growth and greater variation between markets in 2018,” Norges Bank, the fund’s investment management company, said in the report. “Growth was particularly strong in the US, but more subdued in most other markets. Equity prices fell across much of the world, and there was also a steep drop in US equity prices towards the end of the year.”

In that messy fourth quarter, the fund bought $2.48 billion, or 2.2% of its value, worth of stocks, according to Yngve Slyngstad, the bank’s chief executive officer. He said most of these purchases were made in November and December, which should reap better rewards if the 2019 rally continues.

However, Norway is still in shape in the long run, as it has returned 4.75% and 8.3% over the five- and 10-year periods.

“Although performance was weak in 2018, the long-term return has been good and higher than the return on the benchmark index,” said Øystein Olsen, chair of Norges Bank’s executive board.

The Black Knight always triumphs.

Tags: Government Pension Fund Global, Norges Bank, Norway, Sovereign Wealth Fund, Stocks

The $11.9 billion University of Michigan endowment fund has invested $3 million in cryptonetwork fund CNK Fund I, which was raised by venture capital firm Andreessen Horowitz.

The investment was revealed in a recent board of regents meeting agenda reporting on 2018 commitments to alternative investments.

CNK Fund I invests in cryptonetwork technology companies across the spectrum of seed-, venture-, and growth-stage opportunities.

“Crypto has become an important area of innovation and entrepreneurship that warrants focused attention,” wrote Kevin Hegarty, chief financial officer of the University of Michigan, in an agenda letter to the university’s board of regents. “Crypto is currently regarded as a distinct type of technology by entrepreneurs, funding sources, and developers. By creating a separate fund, [Andreessen Horowitz] hopes to be better positioned within this community than would be the case by continuing to invest through its generalist IT funds.”

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In a recent report suggesting institutional investors consider investing in cryptoassets, consulting firm Cambridge Associates said it expects institutional investors exposure to the cryptoassets will rise in the coming years.

The investment into the crypto fund was among $233 million in commitments to alternative investments made by the university in 2018, according to the agenda.

The endowment invested $50 million in TCV X, a venture capital fund that invests in expansion and late-stage technology companies. TCV, as an active, long-term investor, stays involved with its portfolio companies through their initial public offerings and beyond, according to Hegarty. Within technology, TCV focuses on businesses in the internet, software, infrastructure, and services sectors.

The university also committed a total of $50 million to Kuramo Africa Opportunity Fund Ill, and Kuramo Africa Opportunity Co-Investment Vehicle III, which are companion funds sponsored by Kuramo Capital Management and are focused on investment opportunities in sub-Saharan Africa.

The endowment also committed $20 million to Mosaic Ventures II from Mosaic Ventures, a London-based venture capital fund. The fund will invest in early-stage information technology companies in Europe, primarily the UK, Germany, and the Nordic region.

“Mosaic is positioned to take advantage of a market opportunity created by the growing number of European-based technology companies in need of start up financing in an environment where less venture capital is available,” said Hegarty.

The endowment also invested a total of $110 million in real estate funds Carmel Partners Fund VII, KHP Fund V, and Zell Equity International VI Andean Tower Partners Co-Investment.

Yale Dives into Cryptocurrency

Tags: Andreessen Horowitz, Cryptocurrency, Endowments, University of Michigan