The Strategist

Norway oil fund earns record sum thanks to stock market rally

02/28/2020 - 09:40

The Norwegian State Pension Fund (also known as the Oil Fund), the largest national wealth fund in the world, earned a record amount in 2019 thanks to a rally in the stock markets.

According to the fund’s financial statements, revenue amounted to NOK 1.692 trillion ($ 180 billion), or 19.9%. In nominal terms, the indicator was maximum, in percentage terms - the second largest during the existence of the fund (the record was noted in 1998).

At the end of 2018, the fund lost 485 billion kroner, and the loss was noted for the first time in seven years. Over the past ten years, the average annual return on investment of the fund was 7.8%, taking into account management costs and inflation (6%).

Investments in stocks in 2019 generated a return of 26%, in fixed-income instruments - 7.6%, in real estate - 7.6%. At the end of last year, the fund’s investments in shares amounted to 70.8% of its investment portfolio, in bonds - 26.5%, in real estate - 2.7%.

“2019 was a very good year for the fund. The market value increased by 1.832 billion kroner to 10.088 billion kroner at the end of the year. This is the most significant annual increase in the history of the fund,” said Øystein Olsen, head of the Bank of Norway.

The Norwegian State Pension Fund was established in 1990, and is currently managed by the Norwegian central bank’s Norges Bank Investment Management (NBIM). In global markets, the state fund operates through the Government Pension Fund Global. The fund invests primarily outside the country so as not to spur inflation in Norway.

In 2019, the Norwegian government contributed 18 billion kroner to the Oil Fund. The total value of the assets of the Norwegian State Fund as of February 27, 2020 is about 10.39 trillion kroner ($ 1.1 trillion). It owns 1.5% of all shares in the world. The largest share in the portfolio is placed in Apple, Microsoft, Alphabet (a Google holding company), Nestle and