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World's biggest sovereign wealth fund delivers record return

[OSLO] Norway's sovereign wealth fund delivered its biggest return on record in 2017, capping a year in which it passed the US$1 trillion mark and shocked markets by proposing to drop oil and gas stocks.

Not since the fund was created at the end of the last century has it made more money in a single year, measured in kroner, the Oslo-based investor said on Tuesday. The 2017 return was equivalent to US$131 billion, or 13.7 per cent.

The fund's growing exposure to the stock market means that returns may be more volatile in the future, Chief Executive Officer Yngve Slyngstad said at a press conference in the Norwegian capital.

Owning on average 1.4 per cent of the world's listed stocks, the fund largely follows indexes but has leeway for some active management. It's in the process of raising the share of stocks in its portfolio to 70 per cent to improve returns. It's also increasing its influence in areas such as executive pay, corporate corruption and sustainable investing.

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"The fund's cumulative return since inception has passed 4,000 billion kroner. One out of four kroner of return was generated in 2017, after a very strong year for the fund," Mr Slyngstad said in the statement.

The 13.7 per cent return was generated in a year characterised by the biggest stock-market boom in eight years. The development pushed stocks closer to a 70 per cent target.

The fund's stock portfolio rose 19.4 per cent in the year, while fixed income investments gained 3.3 per cent and real estate grew 7.5 per cent. It held 66.6 per cent in stocks at the end of 2017, 30.8 per cent in bonds and 2.6 per cent in real estate.

Its biggest equity investments in 2017 were Apple Inc, Nestle SA and Royal Dutch Shell Plc, while its largest fixed income holdings were US, Japanese and German government bonds.

The fund has also moved more into emerging markets over the past years to raise returns and Norway is currently looking into whether it should buy private equity and infrastructure.

The government withdrew 61 billion kroner (S$10.26 billion) from the fund last year, after tumbling oil prices forced its first-ever withdrawals in 2016.

BLOOMBERG