​Norways Domestic SWF Beats The Market In 2018

The Government Pension Fund Norway (GPFN) – Norway’s domestically focused sovereign wealth fund – reported a 0.4% investment loss for last year but once more beat its benchmark.

The return outperformed its target by 0.8 percentage points in 2018, it reported this week.

Folketrygdfondet, which manages the NOK239.2bn (€21bn) fund, attributed the portfolio’s relative success to picking the right companies within its limited hunting ground.

The GPFN invests primarily in Norway with a 15% allocation to the other Nordic countries, and only in equities and bonds.

Kjetil Houg, chief executive of Folketrygdfondet, said: “We delivered a solid result in a negative market.”

Over the past five years the fund has beaten its benchmark by an average of 1% a year, Folketrygdfondet reported.

“The reason we do better than the market over time is that we choose the right companies and have avoided big losses,” Houg said. “We have also positioned ourselves well in the bond market and exploited several sources of return.”

Houg took up the top role at Folketrygdfondet at the beginning of September 2018, coming to the management firm Oslo Pensjonsforsikring, where he was chief investment officer.

The GPFN’s equity portfolio ended the year with an investment loss of 1.8%, while the bond portfolio produced a positive 1.7% return, the firm reported.

Oslo’s stock market was one of the strongest bourses internationally in 2018 despite a significant fall in the oil price, the fund’s manager noted. It lost 0.7% over the course of the year, according to S&P CapitalIQ, while the S&P 500 fell by 7% and the MSCI Europe index collapsed by 17.3%

The GPFN’s total assets slipped to NOK239.2bn at the end of December from NOK240.2bn a year before.

Yesterday, its sister fund, the NOK8.8trn Government Pension Fund Global, reported a 6.1% loss on its investment portfolio, equivalent to €50bn, with falling equity markets in the first and fourth quarters pulling the fund’s value lower. This return was 0.3 of a percentage point below the benchmark, it said.

However, the fund topped up its equity allocation and has recovered the losses since the start of 2019.