Norway’s $2T sovereign wealth fund could ‘disappear’ amid global crisis: Manager director

Norway’s sovereign wealth fund, the world’s largest with assets of about $2 trillion, could eventually lose its entire value, its managing director warned Tuesday.

Nicolai Tangen said the prospect was “not totally improbable,” given the risks facing the global economy and financial markets.

“Can the oil fund disappear? The answer is yes. And the worst part is that, in the world we live in today, it’s not totally improbable,” he said during a speech in southern Norway.

The fund was established in 1996 to invest the country’s oil and gas revenues for future generations. It has doubled in value in less than a decade, surpassing $1 trillion in 2017, and now finances about a quarter of Norway’s public spending, up from around 10% a decade ago.

But Tangen warned that the extraordinary growth could not be expected to continue indefinitely.

“No country in history has managed to retain such a considerable fortune for any length of time. Fortunes always end up disappearing,” he said, pointing to historical examples in Spain and the UK.

The fund invests globally in stocks, bonds and real estate and is intended to provide long-term financial support for future generations.

Global risks

Tangen highlighted several extreme scenarios that could threaten the fund’s value, including nuclear war and acts of biological terrorism.

He warned of the possibility of a prolonged economic depression caused by a combination of factors, including the bursting of an “AI bubble” and a trade war between the US and China.

The warning comes as investors have placed high valuations on companies linked to artificial intelligence.

A severe downturn of this kind could resemble the Great Depression of 1929, according to Tangen. Even with safeguards that exist today, he said, such a crisis could wipe out “at least 80%” of the value of stock market investments.