Tech and AI drive strong equity returns for Norway oil fund

This time last year Norges Bank Investment Management (NBIM) was talking about the impact of the war in Ukraine as it reported half-year results with a -14 percent return and a -17 percent hit on equities.

Today, that picture is very different as the world’s largest sovereign wealth fund (SWF) – officially named the Government Pension Fund Global but commonly referred to as Norway’s oil fund – announces a 10 percent return off the back of strong equities and a weak kroner.

The market value of the fund increased to kr15.3 tn ($1.5 tn) – up kr2.8 tn over the first six months of the year. Equity investments returned 13.7 percent for the period and the fund’s half-year report also shows a greater proportion of the fund’s assets are now invested in public companies: 71.3 percent, with a market value of kr10.9 tn, up from 68.5 percent at the halfway point in 2022.

Tech and AI

In another turnaround from 2022, technology stocks delivered the fund’s biggest returns at 38.6 percent. ‘The sector benefited from strong demand for new [artificial intelligence] solutions from the biggest internet and software companies and their semiconductor suppliers,’ NBIM notes.

Consumer discretionary was the second-strongest sector with a return of 20.7 percent. ‘Consumption and economic activity held up, despite higher prices and higher interest rates,’ says NBIM, adding that ‘the lifting of pandemic restrictions in China led to further optimism, especially among luxury goods companies.’

Energy companies had been the best performers at this time last year, boosted by strong demand as well as the war in Ukraine. Again, that has been reversed, with oil and gas investments returning just 0.4 percent.

‘Prices for oil, gas and refined products fell back from the very high levels of 2022. The oil market was hit by excess supply, while gas prices dropped as a result of a mild winter, lower industrial demand and thus higher stock levels,’ NBIM says.