LONDON – Norway’s giant sovereign wealth fund said on Tuesday that it would manage its $884 billion portfolio more aggressively over the next three years, taking larger stakes in companies and increasing its real estate portfolio.
The fund, the world’s largest sovereign wealth fund, also said it would roughly double its environmentally related investments to 50 billion kroner, or about $8 billion.
With equity markets having risen strongly and bond yields low, the fund is trying to take advantage of its large size and long-term investment horizons to seek higher returns. It also appears to be pushing the envelope of the conservative guidelines set for its investments by the government, and responding to calls from Norwegian groups to promote socially responsible investments, including by reducing greenhouse gases.
The fund, which invests only in stocks, bonds and real estate, earned 15.9 percent on its investments last year and 6.3 percent over the last decade.
The announcement of its shifts in approach came in a report outlining the fund’s investment management strategy for 2014-2016.
“We seek to capitalize on the fund’s unique combination of characteristics,” Norges Bank Investment Management, an arm of the central bank, which runs the fund, said in the statement. “The sheer size of the fund presents opportunities.”
In the statement, the fund, which is officially called the Government Pension Fund Global, indicated that it was no longer content with just replicating stock indexes but instead wanted to exploit situations that offered better potential returns.
It said it was well-suited to serve as an “anchor investor” in capital raisings or restructurings that would serve as a springboard “to build larger ownership stakes in selected companies.”
The fund said it expected to hold stakes of 5 percent or more in 100 companies by 2016, compared with 45 companies last year. It cannot buy more than 10 percent of any company under its mandate from the government.
The fund said it planned to invest 1 percent of its overall portfolio, which would be about $9 billion, in the private real estate market in each of the next three years. It moved into real estate in 2011 by investing in London’s Regent Street commercial area with the Crown Estate, the British government property management organization.
Real estate now accounts for about 1.2 percent of the overall portfolio but can be increased to 5 percent under government guidelines. Real estate investments will be concentrated in New York, Washington and Boston in the United States.
The fund also said that it would look for European property investments beyond existing holdings in London and Paris and consider investments in what it called global cities outside of Europe and the United States.
The fund was set up in 1990 to invest a portion of the government’s oil revenue in markets outside Norway to save for future generations and prevent current oil earnings from overheating the Norwegian economy.
The fund’s investments have grown increasingly sophisticated under Yngve Slyngstad, the chief executive of Norges Bank Investment Management, who came to the fund in 1998 to build an equity portfolio and became C.E.O. in 2008. Since the end of 2007, equities have increased as a percentage of the portfolio to about 61 percent from 42 percent.
Mr. Slyngstad has also diversified the holdings into smaller companies and into emerging markets, but the stock investments remain concentrated in Europe and North America. The fund’s largest equity holdings are all companies based in Europe, including Nestlé, Novartis, HSBC Holdings, the Vodafone Group and Royal Dutch Shell.
The fund has been under pressure from environmental groups and some political parties in Norway to shed investments in oil and natural gas and coal companies and to increase its green investments. The government has so far largely resisted. It created a panel of experts this year to study the issue.
The planned increase in green investments is unlikely to satisfy environmental groups. “The increase is not ambitious enough,” said Lars Haltbrekken, chairman of Friends of the Earth Norway, in a telephone interview.
Mr. Haltbrekken also said the Norwegian economy could be damaged if the global community reached a sweeping deal on efforts to combat climate change next year, as many environmental groups hope.
The fund says it will be looking for investments in companies active in renewable energy, energy efficiency, pollution control, and water and waste management, as well as in bonds sold to finance such efforts.
So far, the fund has struggled to achieve competitive results on green investments, which earned an overall return of 12 percent from 2010 through 2013, compared with 54 percent for the stock market, according to a recent report by Norway’s finance ministry.
The ministry said that while these investments have existed only for a short period, they illustrate that investing in narrow categories “may entail a significant risk of negative” returns compared with the broader market.