World's biggest wealth fund returns US$53 billion after Trump rally

OSLO (BLOOMBERG) - Norway's sovereign wealth fund, the world's biggest, gained 447 billion kroner (US$53 billion) last year after stocks rallied following the election of Donald Trump and as the investor plowed deeper into emerging and frontier markets.

The US$900 billion (S$1.26 trillion) Government Pension Fund Global returned 6.9 per cent in 2016, after rising 2.7 per cent the previous year, the investor said on Tuesday. Stocks gained 8.7 per cent, bonds rose 4.3 per cent, and real estate investment grew 0.8 per cent.

"The fund returned 6.9 per cent after a year of political events and uncertainty," chief executive officer Yngve Slyngstad said in the statement. "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."

The fund rose for a fifth straight year, benefiting from a rally in equities during the fourth quarter that offset a drop in bonds. Equity markets rose after the surprise election of Mr Trump as US president amid optimism tax cuts and deregulation will spur corporate earnings.

"After the presidential election in the US, markets priced in higher growth and inflation in the global economy," Mr Slyngstad said.

The share of the fund's holdings in Europe fell to 36 per cent from 38.1 per cent a year earlier, while the portion in North America rose to 42.3 per cent from 40.0 per cent. The share held in Asia and Oceania slid to 17.9 per cent from 18.1 per cent. Emerging markets accounted for 10 per cent of the investments at the end of the year, up from 9.8 per cent.

"This slightly higher allocation to emerging markets was due to an increase in the value of our investments and to currency effects," the fund said.

It had 775 billion kroner invested in equities and fixed-income in emerging markets at the end of the year, compared with 736 billion kroner a year earlier. Investments in equities in frontier markets amounted to 13.3 billion kroner, up from 13.0 billion kroner at the end of 2015.

The fund had investments in 77 countries at the end of 2016 after Argentina was added during the year, it said.

The gains also came after the Norwegian government last year made its first ever withdrawals from the fund, which was set up in the mid-1990s. The government withdrew 101 billion kroner last year amid a growing debate over increased spending of oil wealth.