Norway’s oil fund hits USD 1 trillion mark for first time

Yngve Slyngstad, chief executive of the sovereign wealth fund’s manager Norges Bank Investment Management (NBIM), describes the growth seen in the fund’s market value as “stunning”. AM Watch looks at the milestones that have built Norway’s national savings into the investments colossus it is today and the questions now being raised about its future.

Norway became the proud owner of the first sovereign wealth fund (SWF) to own more than a trillion dollars last Tuesday, when its giant oil fund hit the monumental marker in dollar terms at two o’clock in the morning local time.

The Government Pension Fund Global (GPFG), as the SWF is officially called, has been growing fast over the last few years, but assets surged just lately when measured in dollars as a result of several factors.

A strengthening of the world’s major currencies against the US dollar, combined with strong equity markets, rapidly increased the dollar value of the fund, NBIM announced.

Yngve Slyngstad, NBIM’s chief executive, said: “I don’t think anyone expected the fund to ever reach a trillion dollars when the first transfer of oil revenue was made in May 1996.

“Reaching one trillion dollars is a milestone, and the growth in the fund’s market value has been stunning,” he said.

Talking to ordinary Norwegians about the bursting piggy bank they collectively own, one gets the impression their feelings on their highly-visible national wealth are more ambivalent than those expressed by Slyngstad.

Øystein Børsum, chief economist of Swedbank, put his finger on it when he was quoted this week in Norwegian newspaper Dagbladet:

“It is fantastic that we have so much money,” he said, but added: “We are so rich that we should almost be a little ashamed.”

Biggest oil field at sea

So how did such a financial powerhouse come into being?

It was back in 1969 that Norwegians first learned the world’s largest oil field at sea had been discovered in their waters.

The idea of creating a fund to hold the resulting vast oil revenue, and to use only the investment returns from that fund, was first proposed in 1983, and seven years later, the Norwegian parliament passed a law to establish the Government Petroleum Fund.

By 2000, it was worth NOK 222 billion (EUR 23.8 billion), and six years later, when it changed its name to the GPFG, its value had grown almost eight-fold to NOK 1.6 trillion.

In 2008, it was decided to add real estate to its asset mix of equities and bonds, but in that year the fund took a 23% hit in the global financial crisis.

However, it quickly recovered and asset growth has continued steadily upwards since then.

What is the future for the fund and how large can it become?

Public debate around the fund, and the logistics and ethics of managing such a vast pot of money, has now become intense.

Governing politicians — who have the final say on the fund — are now considering a range of proposals and ideas, including separating the GPFG’s management from the central bank Norges Bank.

This was followed by a suggestion from Norway's Centre Party that the oil fund's management could even be moved out of Oslo, to Bergen or Trondheim.

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