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2Q Quarterly report 2002

In the second quarter of 2002, the return on the Government Petroleum Fund, including the Environmental Fund, was -2.93 per cent measured by the currency basket that corresponds to the composition of the Fund’s benchmark portfolio. The overall return in the first half of 2002 was -2.35 per cent.

The currency basket in which the Petroleum Fund is invested depreciated by 8.5 per cent against the Norwegian krone in the second quarter. Measured in NOK, the return in the second quarter was therefore negative, at -11.19 per cent. The overall return for the first six months, measured in Norwegian kroner, was -13.02 per cent. However, changes in the value of the krone have no effect on the Fund's international purchasing power.

The second quarter return on the ordinary equity portfolio (excluding the Environmental Fund) was -12.01 per cent measured in terms of the benchmark portfolio’s currency basket. This reflects the sharp fall during the quarter of share prices in the three main markets, the US, Europe and Japan. Following the fall in interest rates in the US and Europe in particular, a positive return of 3.55 per cent, measured in terms of the currency basket, was recorded for the fixed income portfolio.

The return on the Petroleum Fund’s ordinary portfolio in the second quarter of 2002 was 0.01 percentage point lower than the return on the benchmark portfolio defined by the Ministry of Finance. In the first half of 2002 overall, the actual portfolio outperformed the benchmark by 0.21 percentage point.

The return on Environmental Fund in the second quarter was -12.39 per cent measured in terms of the benchmark portfolio currency basket, and -19.85 per cent measured in NOK. The return for the first half of 2002 was -11.25 per cent measured in terms of the currency basket and -20.94 per cent measured in NOK.

In the second quarter capital equivalent to NOK 53.5 billion was transferred to the Petroleum Fund’s equity and fixed income portfolios. The market value of the Fund’s total securities portfolio, measured in NOK, had nevertheless fallen by almost NOK 20 billion, to NOK 605.4 billion, by the end of the second quarter. This is to some extent due to the negative returns in the stock markets. The most important reason, however, is that during the quarter the krone appreciated against the currencies in which the Fund is invested.