Features

About 10 percent of the Government Pension Fund Global was managed externally at the end of 2010. External mandates were mainly in specific industrial sectors or geographical markets requiring levels of expertise and local knowledge that currently is not practical for NBIM to develop in-house. Experience of this type of external management has been positive to date.

Operational risk management at NBIM is about systematically identifying what may go wrong, assessing how wrong it may go, working to reduce the likelihood of it going wrong and minimising the consequences if it does. In 2010, Norges Bank’s Executive Board set a tolerance level for operational risk at NBIM: there must be less than 20 percent probability that unwanted events will have financial consequences of 500 million kroner or more over the course of a year.

The Government Pension Fund Global’s assets under management have grown considerably in a short space of time. The investment universe has been expanded and other aspects of the regulatory framework have been revised. NBIM has built a global organisation in response to these changes. Costs have risen, but there are also indications that we are realising economies of scale in a number of areas. The fund’s management costs are low relative to other funds.

The recent cocoa industry meeting in Utrecht showed companies are still far from fulfilling their 2001 pledge to eliminate child labour in the sector. Industry leaders must take concrete action to remedy this, say pension fund managers Norges Bank Investment Management and APG Asset Management.

The story of Norwegian oil and gas effectively began with the discovery of the Ekofisk field on 23 December 1969. Today, some 60 fields are in production on the Norwegian continental shelf. Almost 40 years of petroleum production have generated net government revenues of around 4 000 billion kroner in 2009 prices. According to the Ministry of Finance, around 40 percent of the government’s net cash f low from petroleum production has so far been spent through the public budgets(1). Since 1996, the remainder has been transferred to the Government Pension Fund Global and invested in global equity and f ixed income instruments.