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Oslo - The Volkswagen scandal and China's slowdown have impacted the world's largest sovereign wealth fund, Norway's public pension fund, which reported on Wednesday a negative 4.9% return in the third quarter.
Invested in shares, bonds and real estate worldwide, the fund lost 273 billion kroner ($32bn) from July to September, the third-biggest loss in its almost 20-year existence, the Norwegian central bank that manages the fund said.
Its head, Yngve Slyngstad, noted however that in the month of October alone, the portfolio had recovered almost 300 billion kroner.
The fund's shareholdings, which account for 59.7% of its total portfolio, posted a negative return of 8.6%, while bonds, which account for 37.3%, gained 0.2%. Real estate, which accounts for 3%, registered a return of 3.0%.
"We have to expect fluctuations in the value of the fund when there are large movements in the market," Slyngstad said.
"With the fund as big as it is today, this can have a considerable impact in the short term. The fund has a long-term horizon, however, and is in a good position to ride out short-term market volatility," he added.
Chinese shares, which account for 2.8% of the fund's equity holdings, lost around 21.3% of their value during the quarter.
The Volkswagen pollution-cheating scam caused a loss of 4.9 billion kroner for the fund, which owned 1.2% of the German carmaker at the end of September.
For the fund, the impact of the scandal goes far beyond its VW holding - which lost around 50% of its value during the quarter - as the capitalisation of many European carmakers has plunged in the wake of the scandal. But the fund provided no detailed figures.
Fund managers have said they were engaged in "a dialogue" with the German group to study the matter and its implications.
The Norwegian state regularly deposits its oil and gas revenues into the fund, though the deposits have declined over the past year amid falling oil prices.
Next year the government plans to, for the first time, take more out of the fund than it will put in, as it taps the oil fund to balance its budget.
The fund is intended to pay for future generations in the welfare-state after the country's oil wells run dry.
Despite an overall negative return, the fund nonetheless grew in the third quarter thanks to a 12-billion-kroner deposit from the Norwegian state, and, more importantly, the weak Norwegian krone which had a positive accounting effect of 382 billion kroner.
At the end of September, the fund was valued at 7.019 trillion kroner ($825bn at Wednesday's exchange rates).
