World’s Biggest Wealth Fund Faces Record $37 Billion Withdrawal

Norway plans to draw a record 382 billion kroner ($37 billion) from its wealth fund, in a move that will force the world’s biggest sovereign investor to embark on an historic asset sale to generate cash.

The unprecedented withdrawal is more than four times Norway’s previous record, which was set in 2016. The development reveals the scale of the economic damage done by the twin crises of Covid-19 and a collapse in global oil markets, with western Europe’s biggest crude exporter now facing its worst economic slump since World War II.

For the first time, Norway’s government is set to withdraw considerably more than the $1 trillion fund generates in cash flow from dividends and interest payments. The fund hasn’t provided an estimate for its income this year, but has said it’s bound to be lower than previously expected, as companies slash shareholder payouts. The fund’s cash flow was 243 billion kroner last year.

With asset liquidation now an inevitability, the fund is likely to focus sales on its bond portfolio. That’s because it needs to increase its holding of stocks after the equity portfolio fell below a required 70% target of the total portfolio.

The government now expects to spend a record 420 billion kroner of oil money on crisis packages to prop up its economy, with the collapse in petroleum revenue adding to the shock. The government predicts its net cash flow from petroleum activities will drop by 62% to 98 billion kroner, the lowest since 1999.

World’s Biggest Wealth Fund Faces Record $37 Billion Withdrawal, Bloomberg, May 12