Norway’s sovereign wealth fund in 2023 made up for its steep 2022 losses and more, according to the annual report of its manager released this morning – but the numbers also laid bare a loss from active management, attributable to its real estate management.

Norges Bank Investment Management (NBIM) reported the Government Pension Fund Global (GPFG) returned 16.1% in 2023, equivalent to NOK2.22trn (€196bn) – after a loss of NOK1.64trn the year before.

Equities generated a 21.3% return over the course of 2023 for the SWF, fixed income produced 6.1%, while investments in unlisted real estate posted a loss of 12.4%.

Unlisted renewable energy infrastructure returned 3.7% and, as a whole, NBIM said the fund’s return was 18 basis points (bps) lower than the return on the benchmark index.

Trond Grande, NBIM’s deputy chief executive officer, said: “2023 was a record year for the fund – we saw the biggest change in the fund’s value ever.”

The GPFG had ended the year with a value of NOK15.76trn, which was a record high, Grande said.

CEO Nicolai Tangen said: “Despite high inflation and geopolitical turmoil, the equity market in 2023 was very strong, compared to a weak year in 2022.

“Technology stocks in particular performed very well”, he said.

The SWF also benefited from a depreciation of the Norwegian krone, with currency movements contributing to an increase in the fund’s value of NOK409bn, while inflows from national oil revenue amounted to NOK711bn.

Listing factors that had contributed to the overall negative relative return of -18bps, Grande said external managers had added 11bps, while internal equities management and fixed income had each added 14bps, but that real estate had robbed the relative return of -47bps in 2023.

However, since inception, NBIM had cumulatively added NOK318bn in excess returns, he said.

Mie Holstad, chief investment officer real assets, told NBIM’s news conference this morning: “It has been a really challenging year for our real estate investments; there has been a significant repricing, and the main reason for that has been a combination of rising interest rates and rising inflation.”

NBIM’s figures show a big difference in the return for listed real estate compared with unlisted property, with the former at 17% against -12% for unlisted. Overall, the two types of real estate investment combined to give a 0% return, the organisation said.

Holstad said 2023 had been the GPFG’s worst year for private real estate ever, adding that since the second quarter of 2022, the value of the unlisted portfolio was now down almost 22%.

“Our portfolio is well positioned but not at all immune to the market backdrop and the structural changes going on in the office sector, in particular in the US,” she said.

Read the digital edition of IPE’s latest magazine