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Norway’s Sovereign-Wealth Fund Reports Strong Profits

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Norway’s sovereign-wealth fund, managed by Norges Bank Investment Management, achieved a remarkable profit of $143 billion (1.500 billion kroner) in the first half of 2023. This outstanding feat was primarily attributed to the fund’s successful investments in the thriving field of artificial intelligence (AI).

It is worth noting that the fund had faced significant challenges the previous year, experiencing a record loss of $164 billion in 2022 due to substantial declines across most equity stocks. However, energy stocks proved to be an exception during this period.

Equities constituted a significant portion, accounting for 71.3% of the fund, while fixed income holdings made up 26.4%. The remaining balance consisted of unlisted real estate and renewable energy infrastructure. Notably, the fund’s market value climbed to an impressive 15.299 billion kroner ($1.45 trillion), representing a growth of 2.87 billion kroner. Moreover, the fund delivered a solid return of 10% during this period.

Within the equity investments category, technology stocks boasted an exceptional return of 38.6%, making it the top-performing sector. Norges Bank attributed this success to the escalating demand for novel AI solutions from internet and software companies, as well as chip suppliers.

The consumer discretionary sector secured the second position with a significant return of 20.7%. Following closely behind were the industrials, which delivered a respectable return of 15%. Conversely, energy companies experienced a meager return of only 0.4% – a marked departure from the heights reached in 2022 when oil and gas prices were soaring.

Norway’s sovereign-wealth fund has undoubtedly driven impressive results by capitalizing on the potential of technology stocks and AI advancements. As the fund continues to pursue strategic investment opportunities, its strong performance serves as a testament to the country’s forward-thinking approach in the financial sector.

Fund’s Largest Equity Holdings

The chart below highlights the top equity holdings of the fund. Leading the way are:

  • Apple (AAPL) with a gain of 0.23%,
  • Microsoft (MSFT) with a gain of 0.33%,
  • Alphabet (GOOGL) with a decrease of 0.03%,
  • Amazon.com (AMZN) with a decrease of 0.85%,
  • Nvidia (NVDA) with a gain of 0.22%.

Shift in Tech Investments

However, there are indications that the fund is planning to reduce its investments in the tech sector. Investors are becoming cautious, fearing that any gains made may be lost if they hold on for too long.

Nicolai Tangen, Chief Executive of Norges Bank Investment Management, revealed during a press conference that the fund had recently decreased its overweight position in major tech companies.

Tangen was asked about concerns regarding another potential tech market decline. He emphasized that the fund is always vigilant about its largest exposures, which currently lie in the tech sector. Thorough monitoring is conducted to mitigate any risks.

Responsible Approach to AI Development

In a separate statement, Tangen and other executives expressed their support for responsible development and use of artificial intelligence (AI). They stressed the need for a comprehensive regulatory framework that enables safe innovation and reduces adverse impacts.

Key elements of responsibility highlighted by them include board accountability, transparency, explainability, robust risk management processes that go beyond traditional business risks, and considerations for privacy, security, nondiscrimination, as well as human oversight and control.

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