The Norwegian Government Pension Fund Global saw returns of 15.9% in 2013 as equity investments outperformed benchmarks, helping the fund break the NOK5trn (€600bn) mark.
In what the fund described as a “good year”, its value rose by NOK1.2trn, up to NOK5trn, 56% of which came from investment returns.
The remainder of the fund’s increase came through capital inflows from the government and returns on currency conversion into NOK.
It received NOK239bn from the Norwegian government in inflows, investing 8% into emerging markets, 8% into real estate and around 62% into equities.
The fund now invests in 82 different countries, an increase of 10 from 2012.
At the end of the year, its asset allocation saw shifts compared with 2012, as it increased equity holdings by 0.5 percentage points to 61.7%, while reducing fixed income by 0.8 percentage points to 37.3%.
It continued its push to having a 5% real estate allocation at the expense of fixed income, with its allocation hitting 1% from 0.7%.
Its equity portfolio saw returns of more than 25%, compared with 18% in 2012.
Returns came on the back of strong gains in developed markets, as its European investments returned 29%, Japanese 30% and North America 34%.
The fund’s equity allocations to the markets at the end of 2013 were 48%, 7% and 32%, respectively.
Despite the fund’s previous stance on shifting allocations away from Europe towards emerging markets, its 9.7% equity allocation only returned 1.1% overall.
It added six additional markets to its equity portfolio, with investments in Kuwait, Oman, Tunisia, Vietnam, Slovakia and Pakistan.
Within equity performance, the fund saw its best returns come from its telecommunications holdings (38%), and said mining companies were its worst.
Its 6.4% equity allocation to basic materials only returned 5.1%.
The fund was also slightly let down by its fixed income holdings, which returned 0.1% over the year.
It saw negative returns for its sovereign bonds portfolios, led by a -2.1% on its 22% fixed income allocation to US Treasuries.
Its private sector investments offset the negative performance, led by its securitised debt allocations, which returned 7.7% and accounted for 10.5% of fixed income allocations.
The fund said it was continuing its general, and fixed income, shift to emerging markets, and allocated an additional 2.2 percentage points to the asset class compared with 2012, with the addition of Colombia, The Philippines and Hungary.
This came directly from divestment in developed markets, mainly Austria and France. However, fixed income allocations to developed economies was still 78.8%.
Within its growing real estate allocations, the fund saw returns hit 11.8%, as it continued its push out of European markets.
The fund said it expanded its investment into US real estate, which it started at the beginning of last year.
US holdings now account for 18.7% of real estate allocations, all done in 2013.
Yngve Slyngstad, chief executive at Norges Bank Investment Management, which manages the fund, said real estate investments would grow substantially in coming years.
“The year’s results were driven by equity investments, despite various sources of uncertainty in the global economy, stock markets made broad gains in 2013,” he added.