Norway’s $880 billion wealth fund, the world’s largest, will broaden its scope of investments to target “frontier markets” and add more currencies to generate higher returns.

The fund will broaden its “exposure to different sources of return and seek to exploit time-varying investment opportunities,” Norges Bank Investment Management, which manages the fund, said in a strategy report published on its website today. NBIM expects to invest 1 percent of the fund in private real estate in each of next 3 years, it said.

“New frontier markets will be added to our equity investments, and the scope of our fixed-income investments will be widened to include additional currencies,” NBIM said in the report, which outlines its strategy through 2016.

The fund, which owns 1.3 percent of the world’s equities, has delivered less than 4 percent on average since it started investing in the late 1990s. Norges Bank Governor Oeystein Olsen, who oversees the fund, has said it must take on more risk to increase returns. In addition to infrastructure and private equity investments, he advocates increasing stock holdings to 70 percent from the current 60 percent.

The fund will also increase the number of employees to about 600 from 370 now, mostly outside Norway, including 200 to help it grow its real estate investments.

The fund is allowed to hold 35 percent in bonds and 5 percent in real estate. Since being freed to expand into the property market in 2011, the asset class makes up just 1 percent of its total portfolio.

Norway, western Europe’s biggest oil and gas producer, channels its fossil-fuel income into the wealth fund to shield the $500 billion economy from overheating. It got its first capital in 1996, added stocks in 1998, emerging markets in 2000 and real estate in 2011. The government is allowed use the targeted 4 percent return to plug budget deficits.

Bloomberg