The world’s largest SWF, Norway’s GPFG, also known by the name of its manager NBIM, released its annual report today. And the fact that it is also the world’s most transparent fund should not prevent us from analyzing the figures and any underlying trend.

First, let’s look at performance – NBIM returned a +10.9% and grew its assets by an 8.2% (in NOK terms) in 2020. If in normal years, we should cut some slack to the Norwegian fund for being “too liquid” and potentially missing the upside of private markets, 2020 was a year when it should have outperformed all of its peers – and it didn’t. Among those closing on Dec 31, Denmark’s ATP (+23.2%) and South Korea’s KIC (+13.7%) reported stronger returns, and several SOIs grew their AuM in larger amounts including Canada’s CPP (16% up), Australia’s Future Fund (13% up) and New Zealand Super Fund (14% up).

Second, the asset allocation slightly tilted towards equities, which made the relative weight of private capital to decrease to 2.4%. This is five years after the target allocation to real estate was set at 7%. The reason is quite evident by looking at the list of cities NBIM buys properties in – the Fund maintains very strict location criteria and 99% of the portfolio sits in nine major financial centers, which may have limited offer or excessive prices. Since 2019, NBIM is also allowed to invest in unlisted renewable energy assets up to a 2% of the total, but it has failed to do so despite forming a 10-people specialized team in Oslo.

In fact, we recently argued that ESG may be Norway’s weak spot, as it faces increasing pressure to diversify its source of wealth, Oil. If we look at its equities’ portfolio, we can spot over 200 positions in Oil & Gas firms, mostly in the US, UK and France, valued at USD 25.5 billion. This is in stark contrast to the positions in pure renewable energy companies, which are only 30 and valued at USD 2.4 billion. In other words, Norway’s Oil Fund invests 10 times more in “black stocks” than in “green stocks”. We dig deeper into this subject “black vs green” in our upcoming monthly newsletter for our subscribers.

And this is important because NBIM continues to own 1% of the global equity markets (USD 0.9 trillion vs USD 95 trillion). Looking at the 9,123 stocks they had as of December 31 is truly mesmerizing. If we remove the listed Real Estate from the “Financials” sector, we can see that the most popular industry is actually Technology, where stocks are given a heavier weight. In fact, 8% of the equities’ holdings is in MAFGA (Microsoft, Apple, Facebook, Google, Amazon), where it owns c.1% in each of those giants.

As the saying goes, it is easier to criticize than to do better, and there is no consensus as to the best way of investing a portfolio of this size. But with great wealth comes great responsibility and NBIM is the SWF that faces the hardest scrutiny and accountability (or the one that cares the most about receiving them). So, for now, we will let you decide whether their actual asset mix below is the most optimal for the years to come.

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