Norway’s domestic government pension fund, the smaller counterpart of the giant former oil fund, saw its assets shrink in the first quarter of this year by around NOK4.5bn (€487m) after investment losses of 2.2% but said it did outperform its reference index by 0.4 percentage points.

Olaug Svarva, chief executive at Folketrygdfondet, which manages the Government Pension Fund Norway (GPFN), said: “After a dramatic start to the year, with big falls in share prices, interest rates and the price of oil, the stock market rebounded at the end of the quarter.”

The NOK4.5bn loss reduced the fund’s total assets to NOK194bn at the end of March from a level of NOK198.5bn at the end of last year.

Even though the fund’s equities portfolio suffered a 4.8% investment loss in the first quarter, it was this asset class that contributed most to the overall outperformance over the three-month period, Folketrygdfondet said.

The loss on equities was 0.7 percentage points slimmer than that indicated by the reference index for this asset class.

The bond portfolio produced a 1.6% investment return, on the same level as the benchmark.

Svarva said uncertainty linked to oil prices and the international economy continued to hit developments on the equity market in the first quarter.

“We [are] committed to an active and responsible management to produce good results, but we are also prepared for the fact there may be periods where it will be more difficult to achieve outperformance,” Svarva said.

Folketrygdfondet said it also published a report that found its active management had improved the relationship between risk and return compared with the benchmark, and that the excess return it had reported was not due to chance.

The report – aimed at providing a broad foundation for understanding and evaluating the results of the investment management of the fund – showed different risk and cost-adjusted returns, according to Folketrygdfondet.

“Even when we take account of different risk levels and costs, the GPFN has outperformed the reference index set by the Ministry of Finance,” it said.

The GPFN – together with the much larger Government Pension Fund Global or former oil fund, whose assets totalled NOK7.08bn at the end of March – form Norway’s overall Government Pension Fund.

The GPFN invests solely in equities and bonds – with respective strategic allocations of 60% and 40% – and its investment is limited to Norway and the Nordic region.