The Government Pension Fund of Norway made a loss of a 633 billion kroner ($US92 billion) on its investments in 2008.
The loss, which amounts to some 125,000 kroner for every Norwegian, came after a "sharp fall in global equity prices".
Head fund manager Yngve Slyngstad said bond investments also underperformed as the fund's portfolio was "less well diversified" than expected.
The $US330 billion fund is the world's second largest sovereign wealth fund after that of the United Arab Emirates.
It comprises two separate sovereign funds, one of which invests Norway's oil earnings abroad.
The value of the fund's shares, which account for about half its portfolio, fell by about a fifth while the value of its bonds rose only slightly, up 1.6% during the year.
Some 384 billion kroner was injected into the oil fund after Norway, the world's fourth largest oil and gas exporter, saw its earnings soar due to record energy prices during summer.
Currency movements also counted in the fund's favour. Its value rose to 2.275 trillion kroner by the end of the year from 2.120 trillion at the end of the July to September quarter.