Norway's sovereign wealth fund lost $15-billion (U.S.) last year as equity markets were hit by euro zone debt fears.
The $600-billion fund, which invests the Norwegian state's tax revenues from oil and gas activities abroad, suffered its third-worst result in percentage terms since its inception in 1998, declining 2.5 per cent.
Yngve Slyngstad, chief executive officer of Norges Bank Investment Management, which manages the fund, said the steep losses "reflect substantial declines in share prices in 2011 and increased uncertainty about government debt in the euro area."
The fund's equity investments, which amount to about $360-billion, or 60 per cent of the fund, lost 8.8 per cent over the year. The worst-performing stocks were French bank Société Générale followed by German car maker Daimler and U.K. bank HSBC.
The best performers in the portfolio were Apple, the U.S. technology giant, followed by U.K. drug maker GlaxoSmithKline and U.S. oil company Exxon Mobil.
The fund's equity losses were cushioned by a 7-per-cent return on its fixed income investments thanks to the rising price of government bonds in countries perceived to be havens, such as the U.S., the U.K. and Germany.
Mr. Slyngstad said the fund, which is one of the largest in Europe, had invested more than $25-billion back into European equities since the summer, which was part of the group's strategy to invest capital inflows in the worst-performing asset class.
However, the fund also said it had reduced its holdings of Italian and Spanish government bonds and increased its investments in U.S. and U.K. government debt, in a sign that it may have more faith in European companies than some European governments.
European equities took a sharp dip in the summer of last year due to sovereign debt worries, with the benchmark Eurofirst 300 index failing 13 per cent from the start of July to August.
Mr. Slyngstad said: "Because more than half of the fund is invested in Europe, it is of great importance to us that authorities are successful in solving the considerable structural and monetary challenges faced by the euro countries."
The 2.5-per-cent total loss for the fund was 0.1-per-cent below the fund's benchmark portfolio and one of the worst years in the fund's history after the 23-per-cent loss in 2008 and the 4.7-per-cent decline in 2002. The loss was only slightly greater than last year, however.
The fund reported a partial recovery in the final months of the year with its stock and bond investments returning 4.4 per cent in the fourth quarter. Stocks in Europe have been on the rise in recent months with the Eurofirst 300 index up 23 per cent since the start of November.
Copyright The Financial Times Ltd. All rights reserved.