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Solid returns in a turbulent year

The fund returned 13.4 percent in 2012, the second-best result in its history, in a year marked by continued market turmoil and slow global economic growth. The total return since the fund’s inception passed a trillion kroner in November.

The performance last year was driven by equity investments, which returned 18.1 percent amid broad gains in global markets. European equity investments performed particularly well, returning 20.8 percent. Fixed-income investments returned 6.7 percent and real estate investments 5.8 percent.

The fund has received 3,060 billion kroner in petroleum revenue from the government since its first capital injection in 1996. Capital inflows amounted to 276 billion kroner in 2012, little changed from the year before. While we spent 150 billion kroner of new funds in 2011 on European stock purchases, we last year invested nearly the same amount in emerging market bonds. We raised our holdings of government bonds issued in emerging market currencies to 10 percent of the fixed-income holdings at the end of 2012 from 0.4 percent a year earlier.

The share of the fund that is invested in Europe was reduced during the year to 48 percent from 53 percent. The proportion will eventually drop to about 40 percent as we boost investments in other regions, especially in emerging markets. We revised the allocation of fixedincome investments in 2012, weighting government bonds based on the size of a country’s economy instead of the size of its debt.

These are the biggest strategic changes since the equity allocation was raised to 60 percent in 2009 from 40 percent in 2007. We seek to secure the international purchasing power of future generations by broadening the fund’s exposure to growth in the global economy. We develop our organisation and investment strategy with this objective in mind.

Norges Bank manages vast assets. We endeavour to do this as efficiently, prudently and transparently as possible without reducing expected returns. Management costs in 2012 fell to 0.06 percent of the fund’s capital. Risk management and active ownership were strengthened and our investment strategy became more transparent. We will continue in this direction in the years to come.

Oslo, 27 February 2013

Yngve Slyngstad

CEO of NBIM

Last saved: 05/03/2013