Principles for fee agreements with external managers and investment partners

Laid down by the Excecutive Board. Effective from 1 July 2026

Purpose

The purpose of this document is to outline principles governing fee agreements and fees paid to external managers and investment partners in the management of the Government Pension Fund Global. The principles apply to all asset classes and investment strategies where fees are paid to external investment parties, including listed equity, unlisted real estate and unlisted infrastructure for renewable energy.

These principles have been issued with reference to the Ministry of Finance’s management mandate § 1-8, which requires that the remuneration structure in agreements with external managers shall be designed to serve the financial interest of the fund. Further, agreements on performance-related fees shall ensure that the predominant part of any positive excess return is retained by the fund and shall include provisions capping the fees to external managers and investment partners.

Principles

1. Objectives

1.1. The management of the fund shall be cost-effective. Low costs are not a goal in themselves, but cost-efficient management can make a significant contribution to the goal of highest possible long-term net return.

1.2. All fee agreements with external managers and investment partners shall aim to maximise the expected net return for the fund and ensure alignment of interest between the fund and the external manager or partner.

1.3. The predominant part of any positive excess return generated by external managers and investment partners shall be retained by the fund. This applies to the total fee load, including management fees, performance-related fees and other relevant fee components.

1.4. When negotiating fee agreements, the Executive Board expects NBIM to seek to leverage the fund’s characteristics to secure better terms than market practice. 

1.5. Fee agreements shall aim to support the legitimacy of the fund and aim to ensure broad public support in the management of the fund. Not all investments that are financially attractive are suited for the fund, given that the fund is managed on behalf of the Norwegian people.

2. Fee structure

2.1. Fee agreements shall be designed to ensure alignment of interest between the fund and the external manager or investment partner. Performance-related fees are the primary mechanism for achieving alignment where the manager or partner does not hold a significant ownership stake in the investment.

2.2. Fee structures shall aim to take into account the time horizon of the investment strategies used and not create incentives for external managers or investment partners to take excessive risk or to prioritise short-term returns at the expense of long-term value creation. Performance-related fees shall where possible be structured to reward value creation over the relevant investment horizon.

2.3. All fee agreements with external managers and investment partners shall include provisions capping performance-related fees (nominal or percentage caps). The fee cap in each agreement shall be in accordance with the framework established by these principles and be tailored to the strategy, investment structure, and market conditions.

2.4. All fee components shall be assessed and documented in their totality rather than individually, as negotiations on different fee components interact.

3. Governance

3.1. NBIM CEO shall establish further requirements that specify how the principles are to be applied across different investment strategies and asset classes. NBIM CEO shall define what constitutes predominant part of excess return based on the investment strategy, investment structure and relevant market practice.

3.2. NBIM CEO shall review the totality of fee agreements for different investment strategies and asset classes at regular intervals to ensure that the requirements (3.1) remain appropriate as market conditions, investment strategies and the fund's size evolve. A review shall be conducted and documented at least every five years. NBIM is responsible for presenting the results of these reviews to the Executive Board, which will assess whether the fee agreements are aligned with the principles.

3.3. NBIM shall without undue delay notify the Executive Board if fee payments to a single external manager or investment partner could be expected to draw attention among stakeholders, regardless of where the applicable cap is set. NBIM shall also notify the Executive Board if market conditions or fund-specific circumstances entail that individual fee agreements deviate from the principles.

3.4. Fee agreements shall ensure that NBIM has access to sufficient information to monitor and report appropriately on fees paid to external managers and investment partners.

3.5. The compensation for investment personnel working with external managers or investment partners shall be based on returns net of fees where appropriate, ensuring that internal incentives support the objective of negotiating the fee agreement that maximises net returns.

4. Reporting and transparency

4.1. NBIM shall report periodically to the Executive Board on fees paid to external managers and investment partners, and at least once a year. The reporting should provide insights into how the principles are implemented.

4.2. NBIM shall publicly report on fees and costs associated with external management and investment partnerships in connection with the publication of the annual report. Reporting shall explain and provide sufficient context on fees and costs relative to the returns generated for the fund. The primary reporting metric, where feasible, shall be the share of excess return retained by the fund after all fees, including management fees, performance-related fees and other relevant fee components. Where gross return figures are not readily available, NBIM shall use the best available estimates.

5. Responsibilities

Executive Board

NBIM CEO