Norway’s Sovereign Wealth Fund Loses $21 Billion in First Half

The Government Pension Fund Global lost 3.4%, underperforming a benchmark index, largely thanks to its roughly 70% allocation to equities.


The Norwegian sovereign wealth fund lost $21 billion in the first half of the year, thanks to heavy losses in its equity portfolio. 

The Government Pension Fund Global (GPFG) lost 3.4% in the six-month period ending in June, despite a record second-quarter recovery from the first quarter-market sell-off, the central bank said Tuesday. The pension giant, which is worth about $1.18 trillion, underperformed a benchmark index. 

“The year started with optimism, but the outlook of the equity market quickly turned when the coronavirus started to spread globally,” Norges Bank Investment Management Deputy CEO Trond Grande said in a statement. 

The pension giant’s equity portfolio, which accounts for roughly 70% of its assets, lost 6.8% during the pandemic-induced market downturn. While most markets posted negative returns, the European stock allocation, about 32% of the fund’s equity portfolio, plunged the most with an 11.7% loss. Equities from the United Kingdom tumbled 24%. 

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In June, the fund also had a 2.8% unlisted real estate allocation, which lost 1.6%, and a 27.6% fixed income allocation, which gained 5.1%.

Individual stocks that performed best included Amazon, followed by Microsoft and Apple. Energy stocks, such as the fund’s holdings in the Royal Dutch Shell, performed the worst. Financial services companies HSBC Holdings and JPMorgan Chase also performed poorly for the sovereign wealth fund.  

A second-quarter market rally helped the sovereign wealth fund recover losses, thanks to intervention by governments around the world, as well as some countries reopening businesses. 

Still, the fund had to withdraw nearly $19 billion in the first half of the year as the krone depreciated against other world currencies. Investors also remain nervous about the second half of the year. 

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

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Kentucky Retirement Systems Returns 1.2% for Fiscal 2020

State pension plans collectively beat their benchmarks, but fall far short of their peers.


The Kentucky Retirement Systems (KRS)’ investments returned 1.15% for fiscal year 2020, more than double its benchmark’s return of 0.5%, but less than one-third of the median 3.59% return for peer pension plans as reported by Wilshire Associates. The returns raised the value of KRS’ total assets to $18.2 billion, $12.7 billion of which is in its pension funds, with the remaining $5.5 billion in its insurance funds.

KRS said a strong portfolio performance during the second quarter, when the markets rebounded from the March sell-off, helped it outperform its benchmark. However, it attributed its underperformance compared with its peers to having to invest more conservatively than better funded plans, due to its lower funded status.

The various pension funds under KRS reported returns ranging from 0.2% for the KERS-Hazardous insurance plan to 2.36% for the Kentucky Employees Retirement System (KERS) Non-Hazardous pension plan. Of KRS’ 10 pension and insurance funds, only the KERS-Hazardous insurance plan failed to surpass its respective benchmark returns during the fiscal-year period, underperforming by just 0.04 percentage points.

“All of our 10 portfolios continue to be managed conservatively with a unique approach to how the asset classes are grouped for asset allocation purposes,” David Eager, KRS’ executive director, said in a statement.

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Collectively, KRS’ pension funds reported three- and five-year annualized returns of 5.14% and 5.58%, respectively, beating their benchmarks’ returns of 4.75% and 5.38%, respectively. KRS’ 10-year annualized return of 7.37% fell short of its benchmark’s return of 7.55%, and over 20 years, the collective funds slightly outperformed the benchmark by 5.22% to 5.18%.

The asset allocation of KRS is 20.83% in fixed income, 19.71% in US public equities, 19.48% in non-US public equities, 16.35% in high yield/specialty credit, 14.57% in diversifying strategies, and 9.07% in private equity.

The core fixed-income portfolio returned 5.3%, which was the best performing asset class during the fiscal year, but was well off the 8.7% earned by its benchmark. KRS said that while most individual mandates performed well in absolute and relative terms, it attributed the underperformance to weakness in the US corporates one-to three-years mandate.

KRS’ US equity investments returned 4.7% for fiscal 2020, below the 6.5% return of the Russell 3000. The system said that while it doesn’t believe stock selection was an issue, the small cap portfolio underperformed its benchmark.

The non-US equity portfolio lost 2.03% for the fiscal year, but outperformed its benchmark, which lost 4.74%. The system said the outperformance was spurred by two of the four active MSCI ACWI Ex-US mandates, both of which have a growth bias, and both of which outperformed by 15%.

The KRS Specialty Credit allocation lost 1.4%, while its benchmark lost 1%. The underperformance was attributed in part to security selection from a couple individual mandates and from the leveraged loan portion of the portfolio.

The diversifying strategy group lost 2.85% during the year, but there was no benchmark information available in the system’s financial report. And KRS’ private equity investments returned 0.29% for the year, matching its benchmark’s performance.

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