NORWAY - The Norway Pension Fund Global has reported returns of 7.2% in the third quarter, with its equity portfolio growing by almost 10% after fears of economic instability in the euro-zone subsided.
The country's sovereign fund grew to NOK2.9trn (€365bn), assisted by strong returns from oil companies, with BP and Royal Dutch Shell highlighted as particularly good performers.
Investments in equities linked to metal, fertilisers and chemical products, part of the fund's basic materials portfolio, posted the largest increases, returning more than 18%, followed by oil and gas and telecommunications, which grew by 12.3% and 11.1%, respectively.
The value of NPFG's holdings in BP, which recently announced a return to profit in its third-quarter results, increased by NOK3.1bn to NOK13.7bn. Norges Bank said this made the oil company's shares its best-performing stock.
Yngve Slyngstad, chief executive of fund manager Norges Bank Investment Management (NBIM), said the rebound in the global stock markets boosted the fund's performance, contrasting starkly with the equity portfolio's 9.2% loss over the second quarter.
He said: "Better-than-expected earnings figures from a range of companies and reduced fears of an economic slowdown in Europe contributed to the stock market rally. Concern over some southern European countries' sovereign debt also eased somewhat."
NBIM singled out pharmaceutical company Roche Holding, as well as Bank of America and US bank Wells Fargo & Co, as their weakest performers.
Additionally, the sovereign fund's bond portfolio continued its growth from the previous quarter, returning 3.4%.
Officials said that while Greek bonds had been removed from the benchmark at the end of last quarter following the country's downgrade by several ratings agencies, the fund was still committed to holding Greek debt.
NPFG currently holds NOK136bn in US Treasury bonds, its largest overall holding, with UK and German government debt following in second and third place.
The fund said the three countries were considered safer investments compared with Portugal, Spain and Ireland, as well as Greece.
As at the end of the third quarter, the fund still only invested in two asset classes. The majority of assets, 60.4% in total, are allocated to equity, with the remaining 39.6% exposed to the bond market.
However, Slyngstad today announced a NOK4.2bn deal that will see it take a 25% stake in the UK's Crown Estate holdings in Regent Street, a prime retail area.
The governor of Norges Bank Svein Gjerdrem had earlier this week indicated that the first real estate deal was imminent and called for regulations to permit the fund to invest in private equity.