The head of Norway's oil fund warned that tougher times lie ahead for investors
Nikolai Tangen, CEO of Norges Bank Investment Management, said that investors should not expect the stock market’s high returns, as seen in the first half of the year, to continue. The Norwegian sovereign wealth fund, managed by NBIM, posted record profits of nearly $185 billion during this period, according to CNBC.
The fund’s assets total $2.3 trillion. Its equity portfolio declined by 2.6% in the first quarter but rose by 15.98% in the following three months. The equity portfolio’s return for the first half of the year was 12.95%.
Tang said he was surprised by the resilience of markets and economies amid the war between the U.S. and Iran, new inflationary pressures, trade barriers, and geopolitical tensions. According to him, companies are capable of operating amid uncertainty and changing operating conditions, but results similar to those of the past six months should not be expected going forward.
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The head of NBIM also advised investors not to sell off assets during periods of volatility. In his view, a long-term strategy and diversification are key to investing. The fund follows a model similar to index investing, so it invests in companies around the world.
NBIM invests in approximately 1.5% of all publicly traded companies worldwide, and in Europe—in about 3% of such companies. A significant portion of the fund’s profits in the first half of the year came from gains in semiconductor manufacturers’ stocks. Among the most successful holdings were Samsung, SK Hynix, TSMC, ASML, Intel, and Nvidia.
Tangén cautioned that in the event of a significant market downturn, the fund would incur losses, as it participates in both market rallies and declines. According to CNBC, the fund accounts for about 25% of Norway’s fiscal budget.
