Norway’s Folketrygdfondet, the asset manager behind the Government Pension Fund Norway (GPFN), said today that it achieved its highest-ever outperformance in its bond investments in 2020, beating the benchmark by 2.5 percentage points.
Presenting its annual results, the manager of the domestic and Nordic investment portion of Norway’s sovereign wealth fund (SWF) said total assets under management for the GPFN had risen to NOK292bn (€28.3bn) by the end of last year, from NOK269bn a year before.
The fund produced an 8.8% return overall for 2020, which Folketrygdfondet said was 0.9 points better than the market.
Kjetil Houg, chief executive officer of Folketrygdfondet, said: “We did far better than the market in 2020 and succeeded with our active management. It benefits the community.”
The firm reported a 8.1% return on equities, 0.2 percentage points below the benchmark, while its fixed income portfolio generated 7.4% – 2.5 percentage points higher than the bonds benchmark.
“This is the highest excess return achieved in the fixed income portfolio ever,” the Oslo-based manager said.
Folketrygdfondet also announced that the crisis bond fund it reprised in March to provide financing for Norwegian companies struggling with the impact of the pandemic had so far invested 16.8% of the NOK50.3bn (€4.9bn) capital it was handed by the government.
This fund, the Government Bond Fund, made a profit of NOK312m on its investments in 90 bond loans, and had a market value of NOK8.4bn at the end of 2020, the manager said.
Equities in Nordic countries other than Norway generated higher returns in 2020 than domestic shares, Folketrygdfondet said, adding that this had been the trend over the last 10 years.
“In recent years, we have had better returns and better risk characteristics with a Nordic portfolio,” Houg said.
At the end of January, the NOK11trn Government Pension Fund Global (GPFG), which constitutes the bulk of Norway’s huge SWF, reported a 2020 return of 10.9%.
KLP releases excess premium reserves
Norway’s biggest municipal pensions provider KLP announced alongside annual results that, in line with instructions from the FSA, it released NOK23.2bn of premium reserves to the local authorities that own it.
KLP said in its 2020 results statement: “As a result of product changes in public-sector occupational pensions that entered into force on 1 January, KLP was able to release NOK23.2bn in premium reserves.
“The released premium reserves have been transferred to the customers’ premium fund in their entirety,” the Oslo-based firm said.
The funds being transferred are not a bonus, but an excess of reserves which has arisen because of changes in the calculation of public-sector occupational pensions.
This has happened as a result of the new public service pension which took effect at the beginning of 2020, and a new industry agreement on the calculation of national insurance (folketrygden) in public service pensions.
The Norwegian FSA (Finanstilsynet) wrote to life insurers and pension funds in September to clarify how such excesses of premium reserves should be treated.
In investment results, KLP reported a 4.2% value-adjusted return on customer funds in 2020, and a rise in group total assets to NOK807bn from NOK763bn a year before.
Sverre Thornes, KLP’s chief executive officer, said: “We are delighted with a good annual result with stable operations and a good return for our customers despite the major challenges that, among other things, the global infection situation is presenting for economies.”
Book returns amounted to 4.8%, KLP said.
Among asset classes, the pensions institution said a good increase in value on bonds and property had been most important for the result, but that the equity portfolio had also grown significantly in the fourth quarter.
Commenting on the competitive situation in the municipal pensions market, KLP said it was maintaining its strong market position in the field.
“Most of the municipalities and counties that considered putting their pension schemes out to tender chose to remain with the company,” the firm said, adding that one county municipality and some businesses with closed pension schemes had chosen to move to other providers.
Last autumn, KLP was embroiled in a dispute with Vestland County – one of its owners – when the municipality decided after a tender process to award its pensions contract to Storebrand instead.
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