The Petroleum Fund had another good year in 2004. The return was 8.9 per cent measured in international currency. In 2003, the best year so far, the return was 12.6 per cent. The combined return for these two years was thus 22.6 per cent, primarily reflecting high returns in equity markets. In the previous two-year period, the only years with negative returns, the value of the Fund declined by 7.0 per cent.
The return on the Government Petroleum Fund was 12.6 per cent (measured in international currency) in 2003. This is the Fund’s highest ever return. The solid result is due to high returns on equity investments amounting to 22.8 per cent. The return on the fixed income portfolio was 5.3 per cent.
International equity prices fell for the third consecutive year in 2002. The decline since the peak in the winter of 2000 is the sharpest since early in the 1930s. In a historically turbulent year, the return on the Petroleum Fund’s total portfolio of equities and fixed income instruments was negative, at -4.7 per cent. For the last five years, the average annual real return after management costs has been 2.5 per cent
For the first time, the return on the Government Petroleum Fund has been negative. The return in 2001 was -2.5 per cent. This result is due to a sharp fall in equity prices, particularly in the third quarter. The return on the equity portfolio was -14.6 per cent, while the fixed income portfolio recorded a positive return of 5.0 per cent.
The return on the Government Petroleum Fund in 2000 was weaker than in previous years. This was primarily due to a marked decline in international equity markets. At the same time, there was an unusually high yield on government bonds, and overall the return on the Petroleum Fund was positive
1999 was another good year for the management of the Government Petroleum Fund. Measured in international currency, the return was 12.4 per cent. In 1999, as in the previous two years, the return on the portfolio outperformed the benchmark portfolio defined by the Ministry of Finance as a basis for measuring the Bank's management.
This is the first annual report that Norges Bank has published about the operational management of the Government Petroleum Fund. One of the primary objectives of the report is to provide comprehensive background information, to permit an understanding and evaluation of the manner in which Norges Bank is fulfilling its management responsibilities.
