Norway oil fund gains $79bn in 2012
Norway's sovereign wealth fund, the world's largest, rose 447 billion kroner ($79 billion) last year as central bank stimulus measures boosted global stock markets.
The Government Pension Fund Global returned 13.4 percent in 2012, after falling 2.5 percent the year before, the Oslo-based investor said today. The $713 billion fund's stocks returned 18.1 percent, while its bond investments climbed 6.7 percent. Real estate investments returned 5.8 percent.
Stocks rallied last year after European Central Bank Governor Mario Draghi in July pledged to do "whatever it takes" to save the euro and later presented a bond buying program to bring down interest rates. The U.S. Federal Reserve announced a third round of quantitative easing to stimulate the world's biggest economy. The MSCI World Index ( MXWO) of stocks, which fell to a six-month low in June, gained 13.2 percent in 2012.
"Returns were especially high in the second half of 2012 and can in part be related to actions taken by the European Central Bank that were announced in July," the fund said.
The fund, which gets its investment guidelines from the government, held 61.2 percent in stocks, 38.1 percent in bonds and 0.7 percent in real estate at the end of 2012. It's mandated to hold about 60 percent in stocks, 35 percent in bonds and 5 percent in real estate. While the investor mostly follows global indexes, it has some leeway to stray from those benchmarks.
Norway generates money for the fund from taxes on oil and gas, ownership of petroleum fields and dividends from its 67 percent stake in Statoil ASA (STL), the country's largest energy company. Norway is western Europe largest oil and gas producer. The fund invests abroad to avoid stoking domestic inflation. The government deposited 276 billion kroner of petroleum revenue into the fund in 2012. The return exceeded by 0.2 percentage point the benchmark set by the Finance Ministry.
The fund's largest stock holding at the end of the year was Nestle SA (NESN) at a value of 30.1 billion kroner. The largest bond holdings were in US Treasuries at a value of 324 billion kroner, followed by Japanese and German government bonds.
The fund got its first capital infusion in 1996 and has been taking on more risk as it expands globally, raising its stock portfolio from 40 percent in 2007. It first added stocks in 1998, emerging markets in 2000 and real estate in 2011 to boost returns and safeguard wealth. It's struggling to meet a 4 percent return target after rates plunged to record lows and global stock markets failed to retrace a 2007 peak.