Government Pension Fund Global
The Government Pension Fund Global is NBIM’s largest investment mandate. The fund was set up in 1990 as a fiscal policy tool to support long-term management of Norway’s petroleum revenue.
NBIM manages the fund on behalf of the Ministry of Finance, which owns the fund on behalf of the Norwegian people. The ministry determines the fund’s investment strategy, following advice from among others NBIM and discussions in Parliament.
The ministry regularly transfers petroleum revenue to the fund. The capital is invested abroad, to avoid overheating the Norwegian economy and to shield it from the effects of oil price fluctuations. The fund invests in international equity and fixed-income markets and real estate. The aim is to have a diversified investment mix that will give the highest possible risk-adjusted return within the guidelines set by the ministry.
The market value of the fund is currently 4 356 086 622 059 kroner.
No pension payments
The fund was set up to give the government room for manoeuvring in fiscal policy should oil prices drop or the mainland economy contract. It also served as a tool to manage the financial challenges of an ageing population and an expected drop in petroleum revenue. The fund was designed to be invested for the long term, but in a way that made it possible to draw on when required.
The fund was called the Petroleum Fund until 2006 when it was renamed the Government Pension Fund Global. The change highlighted the fund’s role in saving government revenue to finance an expected increase in future public pension costs. Despite its name, the fund has no formal pension liabilities. No political decision has been made as to when the fund may be used to cover future pension costs.
Fiscal policy tool
The fund is an integrated part of the government’s annual budget. Its capital inflow consists of all government petroleum revenue, net financial transactions related to petroleum activities, net of what is spent to balance the state’s non-oil budget deficit.
This means the fund is fully integrated with the state budget and that net allocations to the fund reflect the total budget surplus, including petroleum revenue. Fiscal policy is based on the guideline that over time the structural, non-oil budget deficit shall correspond to the real return on the fund, estimated at 4 percent. The so-called spending rule that no more than 4 percent of the fund’s return should over time be spent on the annual national budget was first established in 2001.