Norway's sovereign fund expects more withdrawals from Israeli portfolio

Finance Ministry has requested that fund review investments in Israeli companies over the Gaza war

Nicolai Tangen, chief executive of Norway's sovereign wealth fund, announces its half-year earnings in Arendal, Norway, on August 12, 2025. Bloomberg

Norway’s $2 trillion sovereign wealth fund, the world’s largest, on Tuesday said that it expects more withdrawals from its Israeli portfolio.

The announcement came one day after it said it was terminating contracts with external asset managers handling some of its investments in Israeli companies.

It has also divested parts of its portfolio in Israel over the deteriorating humanitarian crisis in Gaza. “We expect to divest from more companies,” the fund’s chief executive, Nicolai Tangen, said at a press conference.

The fund announced that it had sold its stakes of just over 2 per cent in Israeli jet engine group Bet Shemesh Engins Ltd (BSEL). It provides services to Israel's armed forces, including the maintenance of fighter jets.

Norges Bank Investment Management (NBIM), an arm of Norway's central bank, which held stakes in 61 Israeli companies as of June 30, in recent days divested stakes in 11, including BSEL. It did not name the other companies.

The fund began investing in BSEL in November 2023, about one month after the war in Gaza began, through an external investment manager, Mr Tangen said. The fund declined to give details of the external portfolio manager.

BSEL was later reviewed as a high-risk stock in May. That change should have been quicker, Mr Tangen said, adding that NBIM should have had a tighter overview of these investments earlier. “We should have been quicker in taking back control of the Israeli investments,” he said.

The review began last week following media reports that the fund had built a stake in BSEL, which did not respond to requests for comment.

An Israeli Air Force F-15I Ra'am taking off with a load of practice bombs. Alamy Stock Photo

NBIM had held quarterly meetings with Bet Shemesh Holdings, but the war in Gaza was not raised as a theme.

“We had discussions about their business in the United States, not about the war in Gaza,” Mr Tangen said, adding that the fund had rated BSEL as a “medium risk” stock with regards to ethics concerns.

In a press statement issued on Monday, the fund said that Norway's Finance Ministry had requested that it review its implementation of the management mandate of the fund, its investments in Israeli companies, and to propose new measures that it deems necessary. It has until August 20 to respond to a letter sent by the Finance Ministry.

The fund said that the 11 Israeli companies that it had divested from since June were “not in the equity benchmark index of the ministry”. Last week, NBIM decided to sell all investments in Israeli companies that are not in the equity benchmark. All investments in Israeli companies that had been managed externally would also be brought in-house.

“These measures were taken in response to extraordinary circumstances. The situation in Gaza is a serious humanitarian crisis. We are invested in companies that operate in a country at war, and conditions in the West Bank and Gaza have recently worsened,” Mr Tangen said in that statement.

A woman carries a bag flour taken after displaced Palestinians raided trucks carrying humanitarian aid in Khan Yunis, in the southern Gaza Strip on August 9, 2025. AFP

The fund, which invests the Norwegian state's revenue from oil and gas production, is one of the world's largest investors, owning on average 1.5 per cent of all listed stocks worldwide. It also invests in bonds, real estate and renewable energy projects.

On Tuesday, it posted a 698 billion Norwegian crowns ($68.28 billion) profit for the first half of the year, earning an overall return of 5.7 per cent in line with its benchmark index.

“The result is driven by good returns in the stock market, particularly in the financial sector,” Mr Tangen said in a statement.