Norway’s wealth fund, the world’s largest, posted a loss of $34 billion in the third quarter of 2023, its biggest quarterly loss since 2008.
A sharp decline in global stock markets, which fell by more than 10% in the quarter, drove the loss. The fund also lost money on its investments in bonds and real estate.
Despite the loss, the Norwegian wealth fund remains one of the most successful sovereign wealth funds in the world. It has generated an average annual return of 5.99% since its inception in 1998.
What caused the loss?
The main cause of the loss in the third quarter of 2023 was the sharp decline in global stock markets. The MSCI World Index, a broad measure of global stock market performance, fell by more than 10% in the quarter.
A number of factors, including rising interest rates, inflation, and the war in Ukraine, drove the decline in stock markets.
What does this mean for Norway?
The loss in the third quarter of 2023 will have a small impact on Norway’s economy. The fund is worth about 1.4 trillion Norwegian crowns, or about $1.4 trillion. This is equivalent to about 360% of Norway’s GDP.
The fund is designed to provide Norway with a financial cushion in the event of a decline in oil prices or other economic shocks. The loss in the third quarter of 2023 will not have a significant impact on Norway’s ability to do this.
Conclusion
The loss in the third quarter of 2023 was a setback for Norway’s wealth fund, but it should not be a cause for concern. The fund is still one of the most successful sovereign wealth funds in the world and it remains well-positioned to provide Norway with a financial cushion in the event of a future economic shock.
