Norway’s Government Pension Fund Global (GPFG) posted a 13% investment gain for 2024, with its manager having failed to achieve the benchmark return for the second year in a row – following decisions to underweight both equities and big tech stocks in a bull year for both.

Equity investments, which made up 71.4% of the now NOK20.2trn (€1.7trn) sovereign wealth fund (SWF) at the end of 2024, returned 18% over the year, fixed income produced a positive 1%, while unlisted real estate made a 1% loss and unlisted renewable infrastructure resulted in a 10% negative return.

At a press conference this morning, Norges Bank Investment Management (NBIM) chief executive officer Nicolai Tangen said: “While the absolute return was strong, the relative return was not. We were 45 basis points behind the reference index, which is the third-worst year in percentage terms.”

Drilling down to the source of the underperformance, he said market exposure had contributed positively by adding 5bps to the excess return, while security selection had detracted by four points.

However, real assets were responsible for 25bps of underperformance with allocation to blame for a further 20bps, according to the central bank investment arm.

Tangen said at the event in Oslo that NBIM was never happy with negative relative returns, but that the allocation decision had been a deliberate one.

“We achieved the results last year with lower than market risk, and we had an underweight to big technology companies – so, in a way, that’s a choice right?” the CEO said.

“Insurance is always expensive if your house doesn’t burn down,” he added.

In the fourth quarter, the GPFG’s return was just 0.2%, ending a year in which quarterly returns had steadily diminished from the 6.3% gain reported for January to March.

NBIM press conference January 2025

NBIM’s press conference was held on Wednesday 29 January 2025

Besides investment results, the SWF also grew strongly last year from inflows from Norway’s petroleum activities, taking in NOK402bn, with 2024 having been the third of three strong – although declining – years in a row in terms of inflows.

The depreciation of the Norwegian krone over 2024, however, added more than double the inflow seen from oil revenue, with the currency effect inflating the GPFG to the tune of NOK1.1trn, the preliminary results published today reveal.

Tangen told journalists 2024 had been a strong year for the fund, but added: “We just want to warn that this will not last forever.

“We are out today with the stress test, and we think that in several of the scenarios we will have a very significant decline of the fund,” he said.

NBIM said in the stress-testing document it published yesterday that it considered three risks to be relevant for 2025 – looking at a combination of likelihood and potential portfolio impact – and these were AI correction, debt crisis, and fragmented world.

This compares to the three risks NBIM chose to consider for 2024, which were debt crisis, repricing of risk and divided world. The scenarios considered in its stress testing all refer to extreme outcomes that have a relatively low probability of occurring, NBIM said.

Asked if the outlook was worse for this year than it had been for 2024, Tangen said: “Stockmarkets were up 18% last year, they are higher and therefore they have further to fall – if they fall.”

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