Norges Bank achieved a 14.5% return for its Government Pension Fund Global in 2021, its second-best return thanks to the stellar performance of US public equities. The fund’s return was 0.74 percentage points higher than the return on the benchmark index, equivalent to NOK76 billion (US$8.5 billion).
In terms of asset allocation, 72.0% of the fund was invested in equities, 25.4% in fixed income, 2.5% in unlisted real estate, and 0.1% in unlisted renewable energy infrastructure.
NBIM now manages a US$1.4 trillion fund which withstood a US$13.5 billion withdrawal to support Norway’s budget in 2021 on top of the US$33.9 billion withdrawn in 2020 – factors that had little impact on AUM growth.
Equities returned 20.8% while fixed income investments saw a return of -1.9%. In alternatives, there was healthy growth with 13.6% growth in unlisted real estate and 4.2% in renewables, even though NBIM
While the Norwegian fund has reported very strong performances in the past three years, it is still behind some other sovereign wealth funds and public pension funds in terms of six-year average returns: NBIM had an average return of 9.6%, behind those of NZ Super (11.8%), Alaska PFC (10%), CalSTRS (10%) and CPP (9.7%).
NBIM lacks the significant alternatives allocation, which have supported the robust multi-year returns of peers. Moreover, the high proportion of public equities means that the fund is prone to volatility. Since the end of 2021 the fund’s overall value has fallen back to NOK11.8 trillion (US$1.32 trillion) today, according to the rolling figure displayed on NBIM’s home page.
Nicolai Tangen, NBIM’s CEO, said: “There was good return in all sectors, but the investments in technology and financials performed particularly well. The investments in technology returned an impressive 30.2%.”
Tech stocks that delivered strong returns included Microsoft and Alphabet.
Mie Caroline Holstad, chief real assets officer, explained the reasons for the strong performance of real estate: “The first one being the reduced impact of the pandemic and then this was coupled with attractive yields compared to fixed-income alternatives, and the last one was simply real estate’s recognition as an inflation hedge. Our global logistics portfolio returned nearly 40% during the year.”
“The good results are mainly due to very strong developments in the equity market throughout the year. There was good return in all sectors, but the investments in technology and financials performed particularly well. The investments in technology returned an impressive 30.2 percent”, says CEO of Norges Bank Investment Management Nicolai Tangen.
Real estate also performed strongly in 2021, after a demanding year in 2020 due to the pandemic. On the downside, the appreciation of the krone meant that there was a NOK25 billion reduction in its AUM.