Asset AllocationFebruary 7, 2022

Real Estate, Equities Drive 14.5% Return for Norway’s Pension Fund in 2021

The fund giant’s portfolio has returned more than $488 billion in the past three years alone to boost its total asset value to $1.38 trillion.

Reported by m

The investment portfolio for Norway’s Government Pension Fund Global returned 14.5%, or 1.58 trillion kroner (US$176 billion) in 2021, marking the third straight year the sovereign wealth fund giant’s investments have earned more than $120 billion. The strong performance raised the fund’s asset value to 12.34 trillion kroner, or $1.38 trillion.

“The good results are mainly due to very strong developments in the equity market throughout the year,” Norges Bank Investment Management CEO Nicolai Tangen said in a statement. “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%.”

The fund also outperformed its benchmark index by 0.74 percentage points, or 76 billion kroner, which is equal to approximately $8.54 billion.

The 1.580 trillion kroner annual return was the second highest in the pension fund’s history, after the 1.692 trillion kroner it earned in 2019. The portfolio’s top three years of investment return performance have occurred in the past three years, as it returned 1.07 trillion kroner in 2020. In total for the past three years, the fund’s investments have returned more than 4.34 trillion kroner, or approximately $488.2 billion, during which time the portfolio’s asset value has ballooned by some $459.2 billion.

The returns were led by the fund’s equity investments, which returned 20.8%, while investments in unlisted real estate returned 13.6%, and unlisted renewable energy infrastructure earned 4.2%. Meanwhile, its fixed-income investments dropped 1.9% during the year.

The fund’s total equity investments, which make up 72% of the portfolio’s asset allocation, are worth just under $1 trillion, while its fixed-income assets, which account for 25.4% of the portfolio are valued at approximately $352.5 billion. Unlisted real estate makes up 2.5% of the asset allocation, or about $35.1 billion, while the remaining 0.1%, or $1.57 billion, is invested in unlisted renewable energy infrastructure.

The fund’s investments in the technology sector returned 435 billion kroner, or approximately $48.9 billion in 2021, while its financial sector investments earned 283 billion kroner, or more than $31.8 billion. The top seven contributions to absolute return came from the fund’s holdings in tech companies: Microsoft, Google-owner Alphabet Inc., Apple Inc., Meta Platforms Inc. (formerly Facebook), Tesla, semiconductor company ASML, and computer systems design services company NVIDIA.

Real estate investments rebounded from a rough 2020, when they suffered as a result of the pandemic, and had a strong performance for the fund in 2021. “The real estate sector has had a good recovery, with listed real estate companies having performed particularly well with a return of 26.8%,” Tangen said.