The Norway Government Pension Fund, also known as the Oil Fund, is a Sovereign Wealth Fund (SWF) owned by the Norwegian government. It was established in 1990 to invest the surplus revenues generated from petroleum sector activities, such as the export of oil abroad. The fund is managed by Norges Bank Investment Management (NBIM), the asset management unit of the Norwegian central bank. The NBIM manages the majority of the SWF assets through investments outside Norway in stocks, bonds, and real estate. It is now one of the largest sovereign wealth funds in the world, valued at over one trillion U.S. dollars. The goal is to invest the oil profits abroad so that Norway can share in global economic growth. The investments serve as a long-term management of revenue so that both current and future generations of Norwegians can benefit from the oil wealth.
Portfolio diversification
Over time the SWF has successfully increased its market value due to diversified streams of revenue. Profits from the extraction of oil and gas make up less than half of the fund’s total worth. The majority of the fund’s assets were acquired through effective portfolio management. The fund has grown to become one of the biggest in the world, holding approximately 1.5 percent of all shares in publicly traded businesses worldwide implying an ownership stake in 9,000 businesses globally. The vast majority of these investments are domiciled in the U.S. from which the SWF receives a share in annual profits. Furthermore, the fund owns properties in cities across the world, adding additional value in the form of rental revenue. Norwegian pension funds also earn a consistent stream of capital from debtors by lending to nations and businesses.
Investment guidelines
The NBIM aims to maximize financial and market returns over time with moderate risk. The SWF limits domestic investment in Norwegian companies or real estate to avoid overstimulating the Norwegian economy. Ethical guidelines also restrict investments in certain sectors. Transparency and ethical standards are major priorities in the fund’s management. The fund complies with moral standards established by the Norwegian government and refrains from investing in firms engaged in the production of weapons, serious environmental harm, human rights abuses, or corruption. Based on these standards, an ethics committee recommends which corporations should be excluded. The SWF is also focused on being a responsible investor through shareholder engagement, voting at annual meetings, and setting expectations on issues like children’s rights, climate change and water management.
