Norway's Oil Fund Down on big Europe Exposure

Norway's $860 billion sovereign wealth fund, the world's biggest, underperformed its benchmarks in 2014 because of its big exposure to Europe and the relatively short duration of its fixed income portfolio, it said on Friday.

The fund, one of the world's biggest investors, returned 7.9 percent last year but this was 0.8 percentage point below its benchmark with Europe's poor growth and rising geopolitical tensions weighing on returns, the fund said.

"This (weaker return) can be explained by a higher weight of European stocks and the shorter duration of the fund's fixed income investments compared with the benchmark," the fund said in a statement.

"Lower growth expectations and rising geopolitical tensions close to the euro are affected returns in European markets," Chief Executive Yngve Slyngstad said in a statement.

The fund's bond holdings fell to 36.5 percent of its portfolio from 37.3 percent three months earlier, while equity holdings fell to 61.3 percent of the fund from 61.4 percent. Its real estate holdings meanwhile jumped to 2.2 percent from 1.3 percent.

The fund, which holds $166,000 for each of Norway's 5.1 million people, owns over 1 percent of global equities with stakes in around 8,000 companies.

Investing Norway's saved up oil and gas wealth, it is expected to exceed $1 trillion by the end of the decade.

Reporting by Balazs Koranyi and Joachim Dagenborg