© Associated Press
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Norway finances almost all of its social activities through a state fund into which oil and gas revenues flow. The technological boom in the stock exchanges has brought the state real wealth, write “Deutsche Welle.”
For years, Norway has successfully used this practice – investing all its revenues from oil and gas production in the financial markets. The serious growth of shares, especially in the field of energy, finance and technology, brought the country in the first half of 2021 revenues of 990 billion kroner (about 95 billion euros), according to the largest state fund in the world.
If this amount were distributed per capita, each Norwegian would receive 17,000 euros. The fund, worth about 1.2 trillion euros, invests in more than 9,100 companies worldwide. On June 30, the value of the fund was 1.11 trillion euros.
“Equity stakes in companies in the energy and financial sectors, as well as in technology companies, generated the highest returns in the first half of the year,” said Nikolai Tangen, head of Norges Bank Investment Management.
Inflation can lead to unprecedented losses
At the same time, the head of the fund warned of the consequences of global inflation. Rising world prices could lead to unprecedented losses. Because inflation can lead to significantly higher interest rates. That, in turn, would have a serious impact on the fund, Tangen told Reuters. Both bond and stock markets will be affected, which could lead to a sharp drop in the value of the fund’s entire portfolio – “one we have never seen before,” he said.
A year ago, the fund recorded a loss of nearly 18 billion euros. In the first half of 2020, the coronavirus crisis led to the collapse of stock markets. In the first quarter of 2020, ie. in the first months of the pandemic – losses amounted to 130 billion euros. During the year, however, the oil fund managed to recover. In the end, he registered a plus of about 102 billion euros. That is why this year’s profits are not a surprise.
The fund invests in well-known companies
Norway established the fund in the 1990s to protect the economy from fluctuations in fuel prices and to finance the country’s high social spending. It also serves as a financial guarantee for the future when oil production is suspended.
The fund is funded by Norwegian oil and gas production, managed by the central bank and invests in large companies, including Microsoft, Apple and Amazon.
In Germany, there are also many calls for pension funds to be more closely linked to capital markets – a similar pattern exists in Sweden, for example. In this way, part of the gross income of the insured could flow into shares guaranteeing a future pension.
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