Norway’s wealth fund to liquidate assets due to COVID-19 impact

Fund had US $ 114.4mn worth of Lankan equity investments as at end of last year

The world’s biggest wealth fund, Norway’s US $ 950 billion sovereign wealth fund, is preparing to liquidate its assets to cover government expenses amid the coronavirus crisis, in a historic move, Bloomberg reported.

The fund is planning to liquidate assets to aid government expenditure as a result of the economic impact of the coronavirus crisis in the country.

The fund’s returns have been eroded in 2020 as the COVID-19 pandemic has trashed equities, Bloomberg had reported.

The fund’s strategy of global sell-off for buying cheap stocks is no longer effective in managing the requirements.  This has led the firm to offloading a sizeable chunk of its bond portfolio, it said. The crisis is further triggered by reduced cash flow with companies that the fund had invested as they suspended dividends in bulk. The fund had US $ 114.4 million worth of equity investments in the shares of 20 Sri Lankan listed companies as at end of last year, compared to US $ 98.3 million at end-2018. The Norway government is facing difficulty in managing expenditure with petroleum revenue facing a sharp decline. 

That means it will need to withdraw historic sums from its wealth fund to make ends meet.

Earlier this month, the Norges Bank had announced that it would funnel oil revenues from its sovereign wealth fund to ease the economic impact on the country.

“The effects of the coronavirus outbreak on the Norwegian economy and the measures implemented to limit the consequences of the outbreak entail an increase in government spending and a decline in government revenues. The government must, therefore, convert an increased share of petroleum revenues into NOK currency. Norges Bank is responsible for executing these foreign exchange transactions on behalf of the government,” it had said in an official statement.

In 2019, the fund had received a cash flow of US $ 23 billion. The government’s expenditure during the crisis will require at least US $ 25 billion from the fund in 2020.

If the fallout from the pandemic lasts for another couple of months, it would drive the fund further towards deeper asset sales, the report added.