CORRECTED - UPDATE 1-Norway oil fund swings to best return from worst

* Fund returned a record 25.6 pct on investments in 2009

* Had posted its weakest ever return in 2008

* Fund almost erased 2008 loss as bond markets normalised

* Return was 4.1 pct above benchmark in 2009

(Corrects figure in lead to billion from million)

OSLO, March 5 (Reuters) - Norway's sovereign wealth fund, Europe's biggest equity investor, swung to its best ever return in 2009, generating more than $100 billion in gains to almost erase its worst ever return posted 12 months earlier.

Commonly known as the oil fund, it gained 613 billion crowns ($103 billion) last year, the central bank said on Friday, reflecting the broad-based market recovery that followed the financial crisis.

The performance beat by 4.1 percentage points the benchmark set by the finance ministry, which measures average returns from a broad range of stock and bond markets.

The fund, which invests oil and gas money in foreign shares and bonds to save for future generations when Norway's petroleum runs out, had lost 633 billion crowns in 2008.

"Developments in 2009 must, in the same way as 2008, to a large extent be viewed in light of the financial crisis," the fund's chief executive, Yngve Slyngstad, said in a statement.

Norges Bank said the value of the Government Pension Fund -- Global rose to 2.640 trillion crowns in the fourth quarter from 2.549 trillion at the end of the third.

Compared with the finance ministry benchmark, the fund's fixed income portfolio had an excess return of 7.4 percentage points in 2009, against a negative 6.6 percentage points in 2008.

"The values have come back much sooner than we could have expected," Slyngstad said.

"The parts of the fixed income markets that stopped working during the financial crisis gradually returned to more normal conditions. This contributed a lot to the strong excess return."

The return on the fund in the fourth quarter was 3.2 percent in international currency terms, against 13.5 percent in the third quarter. Some 62 percent of the fund was allocated to stocks, unchanged from the end of the third quarter.

New transfers to the fund hit a five-year low of 169 billion crowns in 2009, less than half of the record amount in 2008.

The fund is the world's second biggest sovereign wealth fund after that of the United Arab Emirates.

(Reporting by Joachim Dagenborg, Writing by Richard Solem; editing by John Stonestreet)