OSLO, Jan 29 (Reuters) - Norway's sovereign wealth fund, the world's largest at $1.8 trillion, announced a record annual profit of 2.51 trillion crowns ($222 billion) on Wednesday, mainly driven by last year's tech rally. However, the fund cautioned that these robust returns may not be sustained indefinitely.
This marked the second consecutive year of record profits, surpassing the 2.2 trillion Norwegian crowns earned in 2023.
Nicolai Tangen, CEO of Norges Bank Investment Management, the fund's operator, described it as a very strong year during a press conference, highlighting massive gains from technology. Almost half of the returns came from tech stocks, particularly Nvidia.
Tangen issued a warning about the potential for returns to diminish, stating, I just want to warn again that this will not last forever.
Following a decline triggered by China's DeepSeek AI tool earlier in the week, semiconductor stocks in the U.S. and Europe experienced a second consecutive day of losses.
The fund outlined potential risks such as an AI stock correction, a debt crisis, or geopolitical instability, projecting potential losses of up to 18%, 40%, or 35% respectively, and even more if these risks converged.
Despite these warnings, the fund has not made significant adjustments to reduce its exposure to tech stocks. Tangen confirmed that their position in AI-related shares was already "small" and had not been altered significantly this week.
NBIM, responsible for investing Norway's oil and gas revenues, is a major global investor, holding an average of 1.5% of all listed stocks worldwide, along with investments in bonds, real estate, and renewable energy assets.
In 2024, the fund's return on investment was 13%, slightly below its benchmark index return.
Inflows from the Norwegian state into the fund in 2024 totaled 402 billion crowns, falling short of the record set in 2022 of nearly 1.1 trillion crowns.
The fund's equity investments yielded an 18% return last year, while fixed income investments gained 1%, unlisted real estate had a negative return of 1%, and unlisted renewable energy infrastructure returned minus 10%, according to NBIM.
By the year's end, 71.4% of the fund's assets were allocated to equities, up from 70.9% in 2023, while bonds decreased to 26.6% from 27.1%. Unlisted real estate dropped to 1.8% from 1.9%, and renewable infrastructure remained at 0.1% of total investments, unchanged from the previous year.
($1 = 11.2858 Norwegian crowns)