Norwegian sovereign fund returns 10.7% despite oil price crash

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One of Norway’s sovereign wealth funds achieved above-benchmark returns of nearly 11% last year, boosted by strong equity growth despite declining oil prices.

The NOK185.7bn (€20.5bn) Government Pension Fund Norway (GPFN) noted that the Oslo Stock Exchange was down 5.5% over the end of the fourth quarter – with energy sector stocks falling in value by 25% – but nevertheless finished the year up by 5% due to the consumer and materials sectors.

Olaug Svarva, managing director at Folketrygdfondet, which runs the GPFN, said the fund’s 2.1 percentage point benchmark outperformance was its best since 2008 but cautioned that a return of 10.7% – resulting in asset growth of nearly NOK18bn – was unlikely to be repeated.

She added that the 10.6% return on the fund’s equity portfolio – 3.3 percentage points above benchmark – was largely down to the listed firms benefiting from low interest rates and the weakening kroner.

At the end of the year, the equity portfolio accounted for 58.1% of assets, with 47.9% in Norwegian equity and a further 10% in stocks listed in Finland, Sweden and Denmark.

Its largest single holding was Statoil, closely followed by banking group DNB and Telenor.

Combined, the three companies accounted for one-third of the fund’s equity holdings, spread across 144 companies.

Due to the fund’s sizeable shareholding in Statoil, Folketrygdfondet has previously called for the oil firm to improve its disclosure around shale gas.

Svarva credited the 9.8% return on fixed income to falling interest rates, and cautioned that the returns would not be easily repeated.

“We are concerned about what low and negative interest rates could mean for how capital is invested, and for the economic development over time,” she added, accepting that the challenging times ahead could also offer “opportunities”.

The GPFN, funded with the historic surplus of national insurance contributions, has achieved an average return of 7.8% over the last decade.