Norway Sovereign Wealth ‘Oil’ Fund Hits $US 1 Trillion

Norway’s sovereign wealth fund ‘The Fund’ just reached a massive $US1 trillion in value. The so called ‘oil fund’ is the envy of most countries, particularly countries with large commodity resources such as Saudi Arabia and Australia.

Norway Norges Bank

Norway is a lesson in foresight and saving for the future and taking account of finite resources and their limitations. This is the antithesis of the US Federal Reserve and Bank of Japan who live in hope and kick the can down the road with endless QE and low rates.

The ‘oil fund’ began in 1996 when the oil revenue from the government was transferred to the fund for the first time. The mission of the fund is to provide financial wealth and stability for future generations of Norwegians once the oil revenues declines.

Pictured: Norges Bank Headquaters Oslo, caretaker to $US1Trillion

”The Government Pension Fund Global is saving for future generations in Norway. One day the oil will run out, but the return on the fund will continue to benefit the Norwegian population.” via Norway Fund

The next largest Sovereign wealth funds other than China are also oil and gas nations; UAE, China, Kuwait and Saudi Arabia

Largest Sovereign Wealth Funds

  1. Norway US$1trillion
  2. UAE US$828 billion
  3. China US$814,000
  4. Kuwait US$524 billion
  5. Saudi Arabia US$514 billion

Source: Norway, Sovewrign wealth fund institue

Clearly the small nordic nation has been very successful in it’s investments.

Australia for it’s part established the Australian Government Future Fund sovereign wealth fund into which the Australian Government deposits funds to meet the government’s future liabilities for the payment of superannuation to retired civil servants of the Australian Public Service. At 30 June 2016, it was valued at A$122.8 billion.  The fund was established on 5 May 2006 when A$18 billion from government surpluses with income from the sale of a third of Telstra in its ongoing privatisation, was deposited into the fund.

The Fund is managed by Norway’s central bank, Norges Bank.  Norges Bank Investment Management ” aims to make the most of the fund’s two distinguishing characteristics, its long-term approach and its considerable size, to generate strong returns and safeguard wealth for future generations.”

The aim of the fund was diversification from oil and to invest in opportunity. “We invest in almost 9,000 companies and have investments in 77 countries.’ Says Norges Bank on their website.

On Tuesday 19 September 2017 at 02:01 CET, the fund value hit $1,000,000,000,000, or 1 trillion dollar, for the first time.

Norges Bank Investment Management said a strengthening of the world’s major currencies against the US dollar, combined with strong equity markets, have rapidly increased the US dollar value of the fund in 2017.

“I don’t think anyone expected the fund to ever reach 1 trillion dollars when the first transfer of oil revenue was made in May 1996. Reaching 1 trillion dollars is a milestone, and the growth in the fund’s market value has been stunning”, says Yngve Slyngstad, Chief Executive Officer in Norges Bank Investment Management.

The fund’s website shows an annual return of 5.9 percent from the establishment of Norges Bank Investment Management in 1998 to the end of the second quarter of 2017, measured in the fund’s currency basket. After management costs and inflation, the return was 4.0 percent.

See where and what Norway’s Fund invests in HERE

Outside of Oslo Norges Bank has offices in Luxembourg, Tokyo, LONDON NEW YORK SINGAPORE and SHANGHAI to manage their investments. The spread gives you an idea of their focus.

From The Traders Community Research Desk