Norway’s sovereign wealth fund saw continued strong performance from real estate outstrip returns from its equity and fixed income holdings, as 2015 results beat its internal benchmark by 0.5%.

Overall, the NOK7.5trn (€796bn) Government Pension Fund Global returned 2.7% – although the 3.8% returned by its equity holdings was dented by the 0.3% result from its fixed income portfolio, which accounts for 37% of assets.

Norges Bank Investment Management (NBIM) said developed-market equities significantly outperformed emerging market (EM) equities, with the former returning 4.9% and the latter losing 7%. 

Yngve Slyngstad, chief executive at NBIM, said 2015’s results were satisfying, despite volatility in returns from quarter to quarter – blaming negative interest rates and currency turmoil.           

NBIM said falling prices and volatile currency markets were to blame for the losses from emerging and frontier market holdings, which accounted for 7.9% of the fund’s equity portfolio.

Despite the losses suffered from EM equity holdings, the fund’s single-largest EM holding, China, performed well, returning 6%, or 5.7% when measured in yuan.

Losses when measured in international currency were seen from the fund’s Taiwanese and Indian stocks, while losses of more than 38% from Brazilian holdings resulted in Latin American exposure returning -26.9%.

Russian holdings recouped some of the 40% losses seen in 2014, returning 26.1% when measured in rouble.

The fund’s sovereign debt holdings, more than half its fixed income portfolio, achieved a return of 0.2% in 2015.

Euro-denominated holdings achieved a flat return when measured in euro but lost close to 6% when measured in international currency.

Emerging market holdings mirrored the losses largely seen by the region’s stocks, returning -4.9%, while rising interest rates and a weakening real led to losses on Brazilian debt of more than 27%.

Real estate holdings, which have risen to account for 3.1% of the fund by the end of 2015, continued their strong performance, returning 10%.

While down compared with annual results for 2013 and 2014, it was the third consecutive year property outperformed fixed income, and the third time since 2011 it achieved a better performance than the sovereign fund’s equities.

The returns come after a year that saw NBIM complete its largest property transaction to date after it spent $2.3bn (€2.1bn) on a portfolio of logistics assets in the US, part of its ongoing joint venture with Prologis.

In November, it also acquired a 45% stake in 11 office assets in New York for $1.5bn.

The two deals accounted for more than 70% of the NOK44.2bn invested in unlisted real estate during 2015, only slightly less than the NOK45bn paid into the fund by the Norwegian government.

The oil revenue paid to NBIM in 2015 was notably down over the previous year, and accounted for only one-third of the NOK150bn transferred in 2014 – a reflection of the fall in oil prices, which, in 2012, had still seen nearly NOK278bn in oil revenue transferred to the fund by the government.

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