Norway's sovereign wealth fund worried about Brexit uncertainty

 
Jake Cordell
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Norway's sovereign wealth fund is the largest in the world (Source: Getty)

Norway's sovereign wealth fund rode out market turbulence in the second quarter to boost its holdings by an extra £8bn.

The world's largest fund of its kind clocked a return of 1.3 per cent - just shy of the market average - as it highlighted "sharp" volatility as a result of the UK's Brexit referendum.

With the price of bonds soaring in the run-up and aftermath of the vote, the fund's fixed income investments performed best, returning 2.5 per cent, while equities climbed by 1.4 per cent and real estate - which took a big hit from Brexit - dropped by 1.4 per cent.

However, with bond yields moving in the opposite direction to prices, the fund warned "lower interest rates have negative implications for future returns".

Read more: Is the Norway option right for Britain?

The fund's total holdings climbed to 7,177bn Norweigian kroner (£668bn) at the end of June, equivalent to 1.44m kroner per person living in Norway. The wealth fund was started to invest the proceeds from Norway's vast oil reserves and is used to fund state pensions.

Trond Grande, deputy chief executive of the fund, said: "After a period of relatively stable markets at the beginning of the quarter, the British decision to leave the EU sparked a sharp decline in Europe."

Grande said the fund had downgraded its estimates of the value of its UK property holdings by five per cent as a direct result of the market turmoil after the EU referendum.

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