Norway’s sovereign wealth fund rose 544 billion kroner ($67 billion) last year as it broadened its holdings to capture more growth in emerging and frontier markets.
The Government Pension Fund Global returned 7.6 percent in 2014, its smallest gain since 2011, the Oslo-based investor said on Friday. The $860 billion fund’s stocks rose 7.9 percent and its bonds advanced 6.9 percent. Real estate investments increased 10.4 percent, Bloomberg reported.
The fund, the world’s biggest, has warned it expects diminished returns amid record low, and even negative, yields in key government bond markets combined with slow growth in developed markets. The fund boosted its holdings in emerging markets to 10.6 percent, adding countries such as Ghana and Mauritius. It also invested in Nigeria’s currency for the first time.
“2014 was a good year for the fund, with positive results for all its asset classes,” said Yngve Slyngstad, chief executive officer of Norges Bank Investment Management, which manages the fund. “Strong stock markets in the first half of the year and falling yields made a positive contribution to the results.”
Equity Gains
Stocks rose for a sixth year in the US as the Federal Reserve kept rates at close to zero. European equities were boosted as the European Central Bank deployed a series of measures to revive growth. The fund’s emerging-market stocks returned 11.5 percent in 2014, while its European stocks gained just 0.2 percent.
The fund’s investments in Europe fell 39.3 percent from 45.2 percent a year earlier and its North American share rose to 38.9 percent from 32.8 percent. Holdings in Asia and Oceania climbed to 17.5 percent from 14.8 percent of the portfolio.
The investor, which gets its guidelines from the government, held 61.3 percent in stocks, 36.5 percent in bonds and 2.2 percent in real estate at the end of 2014. It’s mandated to hold about 60 percent in stocks, 35 percent in debt and 5 percent in properties. While the investor mostly follows global indexes, it has some leeway to stray from those benchmarks.
Oil Wealth
The fund said this meant that it lagged behind the benchmark by 0.7 percentage point amid plunging yields. This was compensated by being overweight in emerging markets, even as Russian bonds declined.
The government deposited 147 billion kroner of petroleum revenue into the fund last year. The return missed by 0.8 percentage point the benchmark set by the Finance Ministry.
Norway generates money for the fund from taxes on oil and gas, ownership of petroleum fields and dividends from its 67 percent stake in Statoil ASA, the country’s largest energy company. Norway is western Europe’s biggest oil and gas producer. The fund invests abroad to avoid stoking domestic inflation.
