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Norway’s SWF makes 14% in 2017 after EM equities soar

Investment returns nearly doubled last year for Norway’s sovereign wealth fund, boosted in particular by the strong performance of its emerging markets equities investment.

Releasing the fund’s 2017 annual report, Norges Bank Investment Management (NBIM), which runs the NOK8.5trn (€881bn) fund, said it made a 13.7% return on investments last year, up from 6.9% the year before. 

Yngve Slyngstad, chief executive of NBIM, said: “The fund’s cumulative return since inception has passed NOK4trn. A quarter of that return was generated in 2017, after a very good year for the fund.”

Equities produced a 19.4% return for the Government Pension Fund Global (GPFG), up from 8.7% in 2016. Within this, emerging markets equities produced a 28.7% return, up from 13.2% in 2016.

“The return was particularly strong in large Asian markets, most notably China and India,” NBIM said in the report.

Emerging markets, including frontier markets, accounted for 11% of the fund’s equity investment at the end of 2017, the manager said.

NBIM is in the process of increasing the GPFG’s exposure to equities, after the government decided a year ago to lift the allocation to 70% of the fund.

At the end of December, the equities allocation was 66.6% of the fund, compared to 62.5% of the fund at the end of 2016.

Fixed income, meanwhile, generated 3.3%, down from the 4.3% return for the asset class produced in 2016. Unlisted real estate investments returned 7.5%, up from the 1.7%.

Norges Bank confident over UK allocation despite Brexit

Yngwe Slyngstad, NBIM

Credit: Rachel Fixsen

Yngwe Slyngstad address reporters in Oslo

In terms of geographical allocation within equities, NBIM said the UK was the GPFG’s second largest single market with 9.7% of its equity investments. US equities accounted for 36.1% of the fund’s equity holdings.

Asked at a news conference in Oslo this morning whether developments in the Brexit discussions and negotiations would affect this allocation, Slyngstad said they would not.

“We remain a long-term committed investor to the UK in all asset classes and we have a substantial portfolio of real estate in the UK, and this will remain at about the same level no matter what the result of these political discussions,” he said.

The GPFG’s investments in the UK stockmarket were primarily in large companies with a global footprint, Slyngstad added.

At the end of 2017, the fund had grown to NOK8.49trn, from NOK7.51trn at the end of 2016.

The Norwegian government withdrew a net NOK61bn from the fund in 2017, compared to the NOK101bn it took out the year before. The first withdrawal ever from the fund was in January 2016, when the state took out NOK25bn.

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