World's biggest wealth fund gains $26bn on stock rally

Oslo - Norway’s $970bn sovereign wealth fund returned 2.6% in the three months through June, climbing for a fifth consecutive quarter as optimism over global economic growth boosted stock markets.

The fund’s return was 202 billion kroner ($26bn), it said in a statement handed out in Oslo on Tuesday. Its stock portfolio rose 3.4%, bonds gained 1.1% and real estate holdings 2.1%.

“The stock markets have performed particularly well so far this year,” Trond Grande, deputy chief executive officer of Norges Bank Investment Management, said in the report. The fund’s 6.5% return in the first two quarters, equivalent to 499 billion kroner, was the best on record for the period, he said.

Grande also cautioned against assuming the trend would continue. “We cannot expect such returns in the future,” he said. “The record high return is primarily due to the fact that the fund has become so large.”

Owning 1.3% of global stocks, the Norwegian fund largely follows indices but is allowed some active management of its portfolio. It has been expanding more into emerging markets and recently got permission to raise its stock holdings to 70% of its portfolio to boost returns after Norway last year started withdrawing cash from the fund for the first time.

The fund’s best stock return in the quarter came from Nestlé SA, followed by Tencent Holding and Novartis, it said. It lost the most on General Electric, AT&T and IBM, it said.

In fixed-income investments, the fund’s positive return was carried by European government bonds. It lost money on US and Japanese government bonds, it said. Mexican debt makes up the fund’s fourth-largest holding of government debt.

It held 65.1% in stocks in the quarter, 32.4% in bonds and 2.5% in properties. Its mandate is to keep about 70% in stocks, 30% in bonds, with about 7% in real estate that’s now separate from the main portfolio.

The government withdrew 16 billion kroner from the fund in the second quarter.

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