Oslo: Norway's sovereign wealth fund, Europe's biggest shareholder, lost 633 billion crowns ($89.91 billion, Dh330.2 billion) on investments last year and posted the weakest return in its 10-year history at a negative 23.3 per cent.

The value of the fund still grew to 2.275 trillion crowns ($323.1 billion) in the fourth quarter from 2.120 trillion at the end of the third quarter, due to new inflows from Norway's oil and gas sales and currency adjustments.

The 2008 investment loss - amounting to about $18,000 for every Norwegian - piled pressure on authorities to secure the North Sea state's vast oil and gas windfall more effectively.

"During the year, we saw a bank, credit and liquidity crises in the financial system, which has gradually come to encompass a crisis in the real economy," fund manager Yngve Slyngstad said. "The sharp fall in global equity prices was extraordinary."

New transfers to the fund hit a record 384 billion crowns in 2008, driven by a spike in energy prices for the world's No 4 oil exporter and Europe's second largest gas supplier.

Ravaged by the global crisis and poor investment decisions especially in fixed-income, the 2008 return underperformed a benchmark portfolio set by the finance ministry by 3.4 per cent.

"This poor performance was due primarily to the investments in the fixed-income portfolio proving less well-diversified than we had expected, and to us having made investments that exposed us to changes in the price of liquidity," Slyngstad said.

Commonly known as the "oil fund", the Norwegian central bank-run Government Pension Fund - Global invests oil and gas money in foreign stocks and bonds to save for future generations when the natural resources run out.

The world's second biggest sovereign wealth fund after that of the United Arab Emirates usually buys shares in each constituent of a stock index and then takes tactical short or long positions on a limited amount of shareholdings.

Its results have plunged along with global equity valuations. But the fund's discretionary investment decisions only added to the gloom and effectively ate away the above-benchmark returns of past years.

"Our target is to add 25 basis points to the return on the fund over time. After a number of good years, last year's performance has put us right back where we started," Norges Bank Governor Svein Gjedrem said. "The financial crisis has revealed weaknesses in our active management."

Slyngstad said he would maximise efforts "to turn our size and long-term investment horizon" to the fund's advantage. He also volunteered to take a cut in his base salary to 3.5 million crowns in 2009 from more than 5 million last year.

Total return, counted in international currency, sank to a record negative 10.3 per cent in the fourth quarter, with stocks down 20.6 per cent and fixed-income up 1.6 per cent. In Norwegian crowns, the fourth-quarter return was a positive 3.5 per cent.

Nearly 50 per cent of the fund was allocated to stocks at the end of 2008, down from about 53 per cent at the end of September. The fund is slowly boosting the equity portion of its holdings to 60 per cent, but has done so at a time when stock markets have tumbled worldwide.

The fund owned 0.77 per cent of global stocks at the end of 2008 - and shares in 7,900 companies. Its average ownership in European companies rose to 1.33 per cent. It purchased about 40 per cent of its total equity portfolio during the course of 2008.

"The fund has a much longer investment horizon than the vast majority of investors," Slyngstad said.

"The key question is therefore how good today's investments will prove in the long term."