The $1.075 trillion Government Pension Fund Global of Norway, the world’s largest pension fund, returned 13.7% in 2017, or 1.028 trillion kroner ($130.14 billion), which is a record for the fund in kroner terms, and the third-highest annual return in percentage terms since its inception in 1996.
The fund’s market value was 8.488 trillion kroner at the end of 2017, up from 7.510 trillion kroner at the same time last year. The fund’s annual return has been 9.9% percent over the past six years, and the cumulative return since inception was 4,151 billion kroner at the end of 2017, which has surpassed total inflows to the fund.
“This fund size was not envisaged when Norges Bank Investment Management was formed 20 years ago,” said Yngve Slyngstad, CEO of Norges Bank Investment Management in the fund’s annual report, pointing out that the fund reached major milestones in 2017, such as surpassing a market value of 8 trillion kroner in April, and $1 trillion dollars in September.
Equity investments returned 19.4%, unlisted real estate investments returned 7.5%, and fixed-income investments 3.3%. The overall return on the fund was 0.7 of a percentage point higher than the return on the benchmark index, and is asset allocation was 66.6% equities, 2.6% unlisted real estate, and 30.8% fixed income.
“With an allocation to equities gradually rising towards 70%, one have to be prepared for substantial fluctuations in the value of the fund from year to year,” said the fund in its financial report. “In the 20 years since Norges Bank Investment Management was formed at the beginning of 1998, the annual return on the fund has been 6.1%. The net real return, after management costs and inflation, was 4.2%.”
The market value of equity investments was 5.653 trillion kroner, while the unlisted real estate investments had a market value of 219 billion kroner. The market value of fixed-income investments was 2.616 trillion kroner.
The fund has invested in equities in 9,146 companies at the end of 2017, up from 8,985 a year earlier. It had stakes of more than 2% in 1,497 companies, and stakes of greater than 5% in 29 companies. The fund’s average holding in the world’s listed companies, measured as its share of the FTSE Global All Cap stock index, was 1.4%, up from 1.3% at the end of 2016.
The fund’s fixed-income investments consisted of 4,736 securities from 1,262 issuers at the end of 2017, compared to 4,781 securities from 1,250 issuers the previous year. At the end of the year, 9.5% of fixed-income investments were in emerging markets, down from 12.4% in 2016, and bonds denominated in dollars, euros, pounds and yen rose to 82% from 79.6% of fixed-income investments.
The largest equity holding held by the fund is Apple, in which the fund owns an $8.07 billion stake, followed by Nestle ($6.24 billion), Royal Dutch Shell ($6.14 billion), Alphabet ($5.86 billion), Microsoft ($5.81 billion), Novartis ($4.50 billion), and Amazon ($4.47 billion).