Oslo Pensjonsforsikring (OPF), Norway’s largest municipal pension fund improved returns in the second quarter to produce a 1.6% value-adjusted profit on customer funds in the first half of the year, and reported an increase its real assets allocation.

In its interim report, the pension fund said its assets under management rose to NOK79.7bn (€8.6bn) at the end of June from NOK79.5bn at the end of December 2015.

The first half profit of 1.6% is less than half of the level produced in the same period last year, when the return was 3.5%, but was up from the narrow first quarter return of 0.3%.

“The decline is due to a lower return on equities,” OPF said in its report.

Premium income rose to NOK711m in the second quarter from NOK609m in the first. 

Within the collective portfolio, OPF noted that the allocation to real assets had grown strongly over the second quarter, with property reaching a 19% allocation of the total portfolio.

At the end of December, property had made up 17.8% of OPF’s assets.

Real assets together — including property, infrastructure and inflation-linked bonds — grew to represent 24.2% of the portfolio from 22.8%.

Infrastructure returned 9.5% in the first half of the year.

However, the equities portfolios made a 1.9% loss in the period, with quoted shares losing 2.4%, hedge funds down 1.8% and private equity making a 0.2% profit.

In 2015, infrastructure and private equity were OPF’s highest-performing asset classes, returning 13.2% and 16.2% respectively.

Between 2010 and 2015, OPF has been increasing its real estate and private equity allocations, as part of its strategy to take more risk with certain asset classes.

The pension fund has been making larger investments in infrastructure and real estate in order to benefit from the fact that it is a very long-term investor and does not require liquidity, the fund’s chief executive said earlier this year.

Last year, OPF invested more than NOK950m buying a large hangar at Oslo’s Gardemoen airport and acquired an area of industrial land from Norsk Hydro coupled with a land-lease contract.