NORWAY - The Government Pension Fund Global returned 9.6% in 2010, driven by widespread gains in global stock and bond markets.
The 264bn kroner return marks the fund's fifth best performing year ever, said Norges Bank Investment Management (NBIM), which manages the fund.
Equity holdings returned 13.3% over the year, measured in international currency, while fixed-income investments returned 4.1%. The overall return was 1.1 percentage points higher than the return on the fund's benchmark indices.
"In a year marked by the European sovereign debt crisis and fears of an economic slowdown in Europe, the fund posted its fifth-highest result ever," said NBIM chief executive officer Yngve Slyngstad.
"Globally, stocks and bonds gained last year, helped by improving company profits, low interest rates and stimulus measures from the European Central Bank, the Bank of Japan and the US Federal Reserve. The fund also benefitted from its long-term approach, as large equity purchases during the financial crisis in 2008 and in the first half of 2009 yielded solid returns. The value of our fixed-income investments also continued to recover after steep price drops two years earlier."
The fund's best-performing stock sector was basic materials, followed by the industrial and consumer goods sectors. The biggest-gaining stock investments, measured in krone returns, were food company Nestlé, Apple and oil producer Royal Dutch Shell. The weakest performers were Banco Santander of Spain, oil company BP and Banco Bilbao Vizcaya Argentaria of Spain.
The fund held shares in 8,496 companies and 8,659 bonds from 1,686 issuers at the end of 2010. Equity investments accounted for 61.5% of the fund's investments, while fixed-income investments made up 38.5%.
The fund's first real estate investment was announced in November 2010 as part of its strategy to exploit the fund's long-term investment outlook.
The market value of the fund rose 437bn kroner to 3,077bn kroner at the end of the year. Capital inflows from the government amounted to 182bn kroner in 2010.
A number of pension schemes have been prompted to lock in gains with a move into bonds after the estimated deficit across FTSE 100 DB pension schemes improved by £36bn, over the 12 months ending 30 June last year, JLT Employment Benefits found.
HM Treasury has agreed in principle to give NEST a £329m contingent liability guarantee in the event of the master trust's wind up or closure.
AMP Capital has set up a dedicated team to help institutional investors, including pension funds, invest in infrastructure through direct equity allocations.