There is hardly another country in Europe that takes such good care of its retirees. In 2021, the Norwegian Sovereign Wealth Fund, from which the money for pensions comes, has realized a profit of 158 billion euros, writes Deutsche Welle.
Norway’s state fund closed last year with brilliant results. In 2021, it made a profit of 158 billion euros, with a return of 14.5%. The fund, which manages more than 1 trillion euros, has even surpassed its benchmark by 0.74%. In other words: it has developed better than expected, sending the second most successful year in its history.
The practice is not from yesterday
The Norwegian Sovereign Wealth Fund is one of the largest state funds in the world, financed by the extraction of raw materials. For years, the state has been investing oil and gas revenues on global financial markets through the fund, and in the meantime holds stakes in about 9,100 companies worldwide. The fund also invests in securities, real estate and renewable energy infrastructure. The Norwegian sovereign wealth fund is the largest shareholder in the world, holding 1.4 percent of all securities listed on the stock markets.
Norway finances almost all of its social activities through …
The state fund, the profits of which also guarantee Norwegian pensions, was set up in the 1990s to finance the huge costs of the welfare state while protecting it from more serious shocks to the commodity market. The fund holds the equivalent of $ 244,000 for every Norwegian citizen, according to Reuters.
Last year, the fund gained much from the huge growth in stock trading. “Good profits were made in all industries, but the strongest results were in investments in technology and finance,” said Nikolai Tangen, head of Norges Bank Investment Management.
The shares of the technology market had the highest return – a profit of over 30%. Shares of Microsoft, Alphabet and Apple have developed particularly well. But also in the real estate sector, 2021 was very successful, after the pandemic had a bad effect on the industry in the previous year.
The rise will not be eternal
At the same time, Tangen warns of more difficult times ahead. This fantastic rise of the last 25 years will not last forever. “Interest rates are now as low as ever and stocks are at record highs. Sentiment is already changing,” he said. He said we must prepare for a “decade of low profitability”, he told the Frankfurter Allgemeine Zeitung recently.
Tangen is referring to the expected increase in US interest rates, which will probably be reached in March. This prospect has been keeping financial markets in suspense for days. “Whether this will mark the beginning of a period of decline is still unknown,” said the observer.
If interest rates are raised globally, this will hit the Norwegian state fund in several areas, as higher interest rates will make investments in risky instruments less attractive, such as stocks. And that could lead to a devaluation of the overall portfolio on a scale “we’ve never seen before,” the hedge fund manager warned last summer.
