The world's largest sovereign wealth fund had its worst year since 2011 last year, but managed to avoid negative returns

Billy Bambrough
Follow Billy
Olympics Day 15 - Handball
The oil fund was set up in the 1990s to convert Norway’s oil holdings to financial assets, partly to shield the country’s budget from oil-price fluctuations and rapidly grew to the world's largest. (Source: Getty)

The Norwegian Sovereign Wealth Fund has returned 2.7 per cent on its investments in 2015 thanks to a rally in equities late in the year.

The low oil price and slowing emerging markets dragged on returns however, meaning the world’s largest sovereign wealth fund recorded its weakest performance since 2011.

The oil fund, managed by the country’s Norges Bank Investment Management, added 334bn Norwegian kroner (£27.40bn) to its hoade of 7.5 trillion kroner (£616bn).

Yngve Slyngstad, chief executive of Norges Bank Investment Management, which manages the fund, said:

2015 was a volatile year, with negative interest rates, currency turmoil, falling oil prices and weaker growth expectations for emerging markets. We have seen fluctuations in the fund’s return from quarter to quarter, but overall a satisfactory result. The fund made fewer, but larger real estate investments. Two single investments made up the main part of the invested capital in 2015. During the year, we opened dedicated real estate offices in Tokyo and Singapore.

Breaking down the fund’s returns show it made 3.8 per cent on equity investments, 0.3 per cent from fixed-income and 10 per cent from estate investments.

Tech holdings were the closely watched fund’s best returning investments, topped by Google parent Alphabet and followed by Amazon and Microsoft.

Oil giant Royal Dutch Shell, miner Glencore and Spanish bank Santander were its worst performers.

The return is a further fall from 2014’s 7.6 per cent return, down from double digit growth in 2012 and 2013.

The wealth fund posted negative returns in 2011.

Emerging markets assets dragged the fund down by seven per cent, with Brazilian investments dropping by a whopping 38 per cent in value. Russian and Chinese shares both managed to post positive returns however.

At the end of the year the funds’ holdings were made up by 61.2 per cent equities, 35.7 per cent in fixed-income assets and 3.1 per cent in real estate.

There are concerns the fund, which has grown rapidly in the last few years, may have peaked after the Norwegian government withdrew cash for the first time in history last year.

Related articles