Norway’s NOK7.5trn (€846bn) former oil fund made a 6.9% return last year, led by equities bouncing back from January losses.

However, the Government Pension Fund Global’s (GPFG) real estate allocation contributed less than 1% to the overall result, compared to a 10% gain in 2015.

Yngve Slyngstad, chief executive of Norges Bank Investment Management (NBIM), which oversees the fund, said: “All of the fund’s asset classes generated positive returns, but it was the strong equity return in the second half of the year that drove the fund’s results.”

In 2015, the fund made a 2.7% return on investments after management costs.

The market value of the GPFG grew only slightly in relative terms during the year. NBIM said the strength of the Norwegian currency had been a key factor, with the krone’s rise knocking NOK306bn off the fund’s value during the year.

Equities produced an 8.7% return for the GPFG and fixed income generated 4.3% in 2016.

NBIM managed to beat the return on its benchmark index by 15 basis points, NBIM said.

Øystein Olsen, chairman of the executive board of Norges Bank – Norway’s central bank and NBIM’s parent – said the board was satisfied that the return produced for the fund had been good last year, as well as over a longer period.

“The board is also satisfied that management costs have been kept at low levels despite the gradual expansion of investments into new markets,” he said.

Management costs amounted to 0.05% of the fund’s capital in 2016, he said.

This is 0.01 of a percentage point behind the average cost level over the last five years, according to NBIM’s figures.

Net withdrawals by the Norwegian government from the fund totalled NOK101bn during the year, following the first withdrawal ever from the fund in January 2016, when the state took out NOK25bn.

The first deposit to the sovereign wealth fund, which exists to manage Norway’s petroleum wealth, was made back in May 1996.

Slyngstad told a news conference in Oslo that while investments in emerging markets had remained relatively stable over the last five years at around 10%, and were expected to remain so, a “major shift” had happened into US investments and out of European assets.

“What has happened in our portfolio in the fund over the last few years is that we have gradually got a larger proportion of investments in the US,” he said, adding that US investments were now at a record high level for the fund.

The fund’s North American assets grew to account for 42.3% of the fund’s total portfolio at the end of December from 40% at the end of 2015, while European assets reduced to 36% from 38.1%.

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