Losing 285 billion in 90 days, I'm just numb.

The U.S. stock market has been volatile, and even the "reputable" sovereign wealth fund has stumbled.

Recently, the Government Pension Fund Global of Norway released its investment data for the first quarter: the investment return rate was -0.6%, with a huge loss of 415 billion Norwegian kroner, approximately equivalent to 285.3 billion yuan. The main reason for the loss was the sharp decline of U.S. technology stocks: in its investment portfolio, the return rate of stock investment was -1.6%, which significantly dragged down the overall performance of the fund.

Last year, U.S. technology stocks contributed the most to its earnings: the overall return rate of the fund in 2024 was 18.2%, among which the return rate of technology stocks was as high as 35.1%. In just three months, the situation has reversed, and what was once a sweet - heart has become an unwanted one.

Will this setback in the stock market prompt it to enter the private equity market? After all, this largest sovereign wealth fund in the world has never invested a single cent in VC/PE. In an interview in January this year, CEO Nicolai Tangen left a question mark on this issue.

Lost Nearly 300 Billion Yuan in U.S. Stocks

According to the investment data released by the Government Pension Fund Global (hereinafter referred to as "GPFG"), the return rate of GPFG in the first quarter was -0.6%, with a huge loss of 415 billion Norwegian kroner. Calculated at the exchange rate of 1:1.4548 between the yuan and the Norwegian kroner on March 31, GPFG lost approximately 285.3 billion yuan.

Most of this 285.3 - billion - yuan loss came from stock investment. Its stock return rate was -1.6% (the returns of other investment portfolios were: 1.6% for fixed - income, 2.4% for non - listed real estate investment, and 1.2% for unlisted renewable energy infrastructure). Nicolai Tangen, the CEO of the Norges Bank Investment Management (NBIM) which manages GPFG, explained that "this quarter was affected by significant market fluctuations. Our negative return on equity investment was mainly caused by the technology industry."

Just look at the recent trend of the U.S. stock market.

In the first quarter, the Nasdaq index plummeted from 20,000 points and had dropped to 17,299 points by March 31. Apple's stock price dropped from around the high of $250 per share to $210; Amazon's stock price dropped from around $240 to $190; and NVIDIA's stock price dropped from $153 to $103 at the end of March. These three companies are some of the stocks that GPFG has heavily invested in in the past two years.

However, just a few months ago, these investments brought the most generous returns in history to GPFG.

According to the 2024 annual report released by GPFG at the end of January this year, the overall investment return rate of the fund last year was 13%, equivalent to 2,511 billion Norwegian kroner, which means a huge profit of 1,603.65 billion yuan (calculated at the central parity rate of the exchange rate on December 31, 2024). How much is this approximately? Norway has 5.534 million citizens, which means that last year GPFG earned each Norwegian a top - of - the - line Xiaomi SU7 (approximately 290,000 yuan).

This strong growth was also driven by U.S. technology stocks. At the end of last year, GPFG's asset allocation included 71.4% stocks, 26.6% fixed income, 1.8% non - listed real estate, and 0.1% unlisted renewable energy infrastructure. Among them, the return rate of stock investment was 18.2%, and the return rate of technology stocks was as high as 35.1%. The annual report also specifically stated that NVIDIA, Apple, and Amazon made the most positive contributions to the returns in 2024.

It is also worth mentioning that in 2023, GPFG's high returns were also driven by U.S. technology stocks: its overall return rate was 16%, and the return on stock investment was 21%. It can be seen that the soaring U.S. stock market in the past two years has brought a huge amount of wealth to GPFG's securities.

However, uncertainty is the enemy of asset allocation. From the officially disclosed data, the loss of 415 billion Norwegian kroner caused by the drag of the U.S. stock market, plus the loss of 879 billion Norwegian kroner caused by the sharp fluctuations in currency exchange rates, reduced the value of the fund from 1,974.2 billion Norwegian kroner at the end of last year to 1,852.6 billion Norwegian kroner (another 78 billion Norwegian kroner came from the net inflow from the government).

For the world's largest wealth fund, these losses may not cause panic. After all, in the first quarter of 2020, affected by the COVID - 19 pandemic, GPFG also suffered a huge loss of 1.33 trillion Norwegian kroner (approximately $124 billion). At that time, they told the outside world that "our fund has a 30 - year history and can remain calm in the face of turmoil."

Moreover, compared with a black - swan event like the COVID - 19 pandemic, GPFG may have anticipated the risks of the U.S. stock market, but the amplitude of the fluctuations may have far exceeded everyone's expectations.

Sell U.S. Technology Stocks and Increase Chinese Assets

In the 2024 annual report, the management team emphasized the possible risks. Among them, the value correction of AI technology stocks, the debt crisis, and the world division caused by anti - globalization will significantly affect the fund's earnings.

They calculated that "in all scenarios, the losses of stocks are quite large, but the impacts on the fixed - income market vary. The debt - crisis scenario results in the most severe losses, and the value of the fund drops by 40%." As summarized in the annual report: we must be prepared for significant fluctuations in the fund's returns and market value.

At the beginning of this year, at the Davos Forum, Nicolai Tangen issued another warning about the U.S. stock market. He said that for contrarian investors, "the best thing to do is always to go against the crowd." Currently, the contrarian move should be to sell U.S. technology stocks and private - equity bonds and increase Chinese assets.

From public information, GPFG is indeed significantly increasing its Chinese assets. As of the end of 2024, among the top ten stocks of the fund in China, except for a slight shrinkage in the market value of its position in Pinduoduo, the market value of its positions in other stocks has increased.

The market value of its position in Tencent Holdings reached as high as $6.672 billion (approximately 47.961 billion yuan), an increase of $2.794 billion compared with the end of 2023, with an increase rate of 72%. It is the largest - weighted stock in its Chinese portfolio. The market value of its position in Meituan increased by more than 100%, the market value of its position in Xiaomi Group increased by nearly 176%, the market value of its position in Ctrip increased by approximately 100%, and the market value of its position in Manbang increased by more than 500%.

Moreover, GPFG participated in 112 initial public offerings last year. Two of the three largest companies were from China, namely Midea Group and SF Holding.

Therefore, there is reason to believe that in the year when the U.S. stock market soared last year, GPFG practiced the contrarian investment advocated by Nicolai Tangen. However, it is difficult to turn a large ship around. It has a heavy position in the U.S. technology stock sector and mainly adopts a passive investment strategy. In the context of the sharp fluctuations in the capital market in the first quarter of this year, it was inevitable to be impacted.

Can $80 Billion Be Invested in Private Equity?

Back to the primary market, private - equity investment has always been an important investment area for sovereign wealth funds. However, this big investor from Norway is almost the only one in the world that has kept PE/VC at bay.

Nicolai Tangen once joked in a podcast: (not investing in private equity) "It's a bit like when you're participating in a cross - country orienteering event, everyone is running in one direction, and only you are running in the other direction. You have to wonder if you're holding the map upside down or something?"

So in 2018, the management team advised the government to allocate some investments to the private - equity field. At that time, the mobile - Internet industry was at its peak. The team cited the examples of two super - unicorns, Uber and Airbnb, as if to say to the leadership, "If you don't invest now, it'll be too late."

However, the Norwegian Ministry of Finance quickly rejected the management team's proposal. The reason was the concern about the low transparency and high management costs of non - listed companies. In the annual white paper of the fund submitted by the Ministry of Finance to the Norwegian Parliament that year, it was written that "investments in non - listed companies will face challenges in terms of transparency, management costs, and the limited active - management model."

Indeed, considering the detailed level of information disclosure of GPFG, the high - level non - transparency of private - equity investment information is indeed a challenge.

In the second half of 2023, the management team proposed a relevant plan again and provided a feasible solution: allocate 5% of the assets to private - equity investment, equivalent to approximately $80 billion (approximately 570 billion yuan). Form a management team of 10 - 15 people (to be expanded to 30 people later) and rely on private - equity management companies in developed markets in Europe and North America to make investments.

However, contrary to expectations, in April 2024, the Norwegian government rejected the fund management team's proposal again. Trygve Slagsvold Vedum, the Norwegian Minister of Finance, announced to the outside world that "we have concluded that we will not open up to non - listed stocks for now. The reasons are the relatively high management costs, the low information transparency of non - listed companies, and the need to reach a broad political consensus." In short, the matter of investing in private equity still needs further consideration.

At the Davos Forum held in January this year, Nicolai Tangen was interviewed by David Rubenstein, one of the founders of The Carlyle Group. He said that the government is still promoting and going through the process of investing in private equity.

This setback in the U.S. stock market may gradually make the Norwegian authorities realize that investing no more than 5% of the funds in start - up companies with higher potential is not only a matter of financial return but also like buying a ticket to the future.

References: 1. China Fund News, The World's Largest Sovereign Wealth Fund Takes Action! January 29, 2025.

2. China Venture Capital, Another Top - Tier LP Quits

This article is from the WeChat official account "China Venture Capital", author: Yang Boyu, published by 36Kr with authorization.