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Tech rally drove $123 billion return in 2020 for world’s largest sovereign wealth fund

January 28, 2021, 11:41 AM UTC

Norway’s sovereign wealth fund, the world’s biggest, returned $123 billion last year as the stratospheric rise in technology stocks padded a portfolio already buoyed by markets fattened on crisis support packages.

The result, the second highest in over two decades, was driven by a more than 12% bounce in the $1.3 trillion fund’s equity portfolio. Bonds returned 7.5% while real estate lost 0.1%. Tech stocks alone delivered a 42% return, led by the fund’s holdings in Apple Inc. and Amazon.com Inc.

Chief Executive Officer Nicolai Tangen said the huge gain in tech stocks was “mainly due to the pandemic resulting in a massive increase in the demand for products for online working, education, trade and entertainment.”

2020 was a dramatic year for Norway’s wealth fund. Tangen, who started as chief executive in September, was brought in after a turbulent recruitment process and has already made clear he plans to change a few things at the investing behemoth. The 54-year-old plans to rely more on outside asset managers and technology to chase the best results. He’s also said sustainability will become a bigger focus area.

On Thursday, Tangen said the fund has now invested almost $12 billion in environmental mandates.

The fund made about $30 billion in returns just from its holdings in Apple, Amazon, Microsoft Corp., Tesla Inc., Alphabet Inc. and TSMC, according to Thursday’s report.

Among its worst investments were the fund’s portfolio of U.K. stocks, which lost about 70 billion kroner ($8 billion) last year. The fund lost about $10 billion on its oil and gas holdings.

Set up in the 1990s, the fund was created to invest Norway’s oil and gas revenues abroad. The idea was to prevent the domestic economy from overheating, while preserving and building wealth for future generations. With holdings in about 9,000 companies, the fund owns about 1.5% of global stocks. It’s in the process of raising its exposure to North American stocks, after having expanded the equity share of the overall portfolio to 70% from 60% in 2017.

Norway’s government made record withdrawals from the fund last year totaling $34 billion, to fight the pandemic. The amount was more than the investment vehicle could cover just using its cash flow, forcing it to liquidate assets in its bond portfolio.