Norway’s sovereign wealth fund – the world’s largest owner of equities – made its second highest return in percentage terms ever last year, topped only by the bounce back that followed the global financial crisis in 2009.

Releasing annual results for the Government Pension Fund Global (GPFG) this morning, its manager Norges Bank Investment Management (NBIM) presented a picture of a fund now more heavily dominated by the stock of tech giants Apple, Microsoft and Alphabet, and finally having reached its strategic allocation to equities.

Yngve Slyngstad, NBIM chief executive officer, said in its latest annual report: “2019 brought a record-high krone return of NOK1.692tn (€164bn), and the percentage return was the second-highest in the fund’s history, topped only by the rebound from the financial crisis in 2009.”

The return of 19.9% for the year follows the 2018 loss of 6.2%, but is still below the 25.6% return the fund achieved in 2009 after the 23.3% loss it suffered the year before.

The market value of the fund, which was created to invest Norway’s oil revenues, increased to NOK10.1tn at the end of 2019 from NOK8.3tn a year before, mainly on its investment returns, but also because of an NOK18bn transfer of capital from the government and the effect of the krone depreciating against several major currencies during the year, which added NOK127bn, NBIM reported.

The net contribution into the oil fund from the government comes after 2018’s inflow, which followed a two-year period when for the first time the government was making net annual withdrawals from the fund.

Of the GPFG’s three main asset classes, equities returned 26% last year, unlisted real estate investments produced 6.8% and fixed income investments generated 7.6%.

The fund beat its benchmark by 0.23 percentage points, the Oslo-headquartered manager reported, saying stock picking had been the biggest single contributor to this outperformance.

The executive board said in the annual report that of the three main categories of investment strategies the fund used, fund allocation had contributed negatively to the relative return, while security selection and asset management both contributed positively.

“The single largest contribution to the relative return in 2019 came from internal security selection in equity management,” the board said.

In terms of the three asset classes, the board said real estate management had made a negative contribution to the relative return, while both equity and fixed income management had made positive contributions in 2019.

Yngve Slyngstad, CEO, NBIM

Yngve Slyngstad, chief executive officer at NBIM

NBIM’s allocation to equities surged during the year to 70.8% from 66.3% at the end of 2018, while bonds declined to 26.5% of the GPFG from 30.7%. Unlisted real estate dipped to account for 2.7% of the fund from 3% in 2018.

This level of equities exposure brings the sovereign wealth fund up to the strategic allocation to equities in its benchmark index of 70%, which was set in 2017.

The fund boosted its equity investments particularly in the last two months of 2018 when stock markets around the world were falling, NBIM revealed a year ago.

The oil fund’s holdings of technology giants ballooned in 2019, the annual report showed, with the top two increasing their size lead over the fund’s other top 10 equity investments.

Investments in Apple jumped to NOK125bn at the end of last year including both equities and bonds, up from NOK70bn a year before, while holdings in Microsoft equities and debt rose to NOK106.9bn from NOK67bn.

These holdings were much larger than the fund’s third biggest corporate exposure of NOK78.4bn to Alphabet, whereas in 2018 the gap between the second and the third on the list had been much narrower at around NOK4bn.