Norway's Sovereign-Wealth Fund Closes In on $1 Trillion Valuation -- Update

By Dominic Chopping Features Dow Jones Newswires

Norway's sovereign-wealth fund, the world's biggest, continued its march toward a $1 trillion valuation after the best half-year return in its history.

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The fund announced a 2.6% return on its investments in the second quarter of this year, helped by a solid performance from its stock-market portfolio.

Norges Bank Investment Management, the arm of the central bank that manages the fund, said Tuesday the quarterly return equated to 202 billion Norwegian kroner ($25.6 billion).

The total value of the fund on June 30 was 8.02 trillion kroner--or $957.13 billion calculated at the exchange rate on that date. This figure would have been even higher were it not for a 16 billion kroner withdrawal by the government and the strong krone, which in combination reduced the value of the fund by 32 billion kroner, NBIM said.

Norway approached the trillion-dollar milestone despite pressure on sovereign-wealth funds globally. Ultralow interest rates are crimping returns and cheap oil is cutting into the income of the largely resource-dependent countries rich enough to possess such funds.

Last year was the first time Norway's government, seeking to fill a hole in its budget, withdrew more money from the fund than it put in.

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However, stock markets have set record after record in 2017, powered in large part by a revival in U.S. corporate earnings. The Dow Jones Industrial Average passed 22000 in August, more than tripling from a low in March 2009.

"The stock markets have performed particularly well so far this year, and the fund's return in the two first quarters was 6.5%," Trond Grande, deputy chief executive of Norges Bank Investment Management, said.

"This gives a total return of 499 billion kroner, which is the best half-year return measured in Norwegian kroner in the history of the fund. We cannot expect such returns in the future. The record-high return is primarily due to the fact that the fund has become so large."

Equity investments generated a 3.4% return for the fund with fixed income and unlisted real-estate providing 1.1% and 2.1% returns respectively.

NBIM said the fund had 65.1% of its reserves invested in equities on June 30 with 32.4% in fixed income and 2.5% in unlisted real-estate.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

August 22, 2017 07:52 ET (11:52 GMT)