Norway wealth fund rides out pandemic with diverse portfolio

OSLO (Reuters) – Norway’s $1.3 trillion sovereign wealth fund, the world’s largest, said the COVID-19 pandemic and subsequent financial market upheaval had shown the importance of a diverse portfolio.

The fund, which invests revenue from Norway’s oil, holds stakes in around 9,000 companies and owns around 1.5% of all globally listed shares, as well as fixed-income and real estate.

“Some markets, sectors and segments have recovered rapidly, while others have not. This underlines the importance of being well diversified,” the central bank, which manages the fund, said in a letter to Norway’s finance ministry dated Dec. 21.

“For a long-term investor such as the fund, it is also important to understand the drivers behind these different returns, and especially whether these differences can be expected to persist,” the letter, published on Wednesday, said.

While stocks fell sharply in the early phase of the coronavirus outbreak, the fund’s bond portfolio surged in value, before a reversal towards the end of 2020.

The fund’s physical real estate portfolio, which is allowed to represent up to 7% of investments, also saw changes.

“Even before the outbreak, we had noticed that the retail sector was performing worse than the logistics sector. This trend has intensified during the pandemic,” it said.

Office properties, already trending towards less space per worker in recent years, had seen a rise in working from home, but also to an increase in the space required per worker.

“Major cities, where many of our properties are located, have been hit harder by the pandemic. In addition, we have seen few new projects starting up this year, which could hit the supply of new properties in two to three years,” the fund said.

“We will be working on all of these factors in our development of the fund’s real estate strategy,” it added.

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