Government Pension Fund of Norway

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Government Pension Fund of Norway — Overview and Key Facts

What it is

The Government Pension Fund of Norway refers collectively to two state investment funds that channel Norway’s petroleum revenues to support public pensions and long‑term fiscal stability:
– Government Pension Fund Global (GPFG), commonly called the Oil Fund — a large, internationally invested sovereign wealth fund.
– Government Pension Fund Norway (GPFN) — a smaller domestic fund focused on investments within Norway and the Nordic region.

Purpose

The funds are designed to:
– Save and invest surplus petroleum revenues for future generations.
– Smooth government spending over economic cycles.
– Help meet rising public pension costs and other long‑term fiscal obligations.

Structure and management

  • The funds are governed by legislation and investment guidelines issued by Norway’s Ministry of Finance.
  • Norges Bank Investment Management (NBIM), part of Norway’s central bank, manages the GPFG.
  • Folketrygdfondet manages the GPFN and focuses on domestic and Scandinavian assets.
  • The Ministry of Finance defines the strategic risk/return framework and overall mandate.

Investment strategy

  • The strategy aims to maximize long‑term returns within a moderate risk tolerance, relying on financial theory, research, and experience.
  • GPFG holds global equities, fixed income, and real estate. GPFN is limited to domestic and regional securities and is a major shareholder in many Norwegian companies listed on the Oslo Stock Exchange.

Responsible investing and exclusions

  • An independent ethics council assesses and recommends exclusions for companies involved in activities deemed unacceptable under ethical guidelines.
  • Responsible‑investment criteria and Environmental, Social, and Governance (ESG) considerations are integral to the funds’ governance and asset selection.

Oil and gas exposure

  • Although funded by petroleum revenues, the GPFG has examined reducing direct exposure to oil and gas equities to limit vulnerability to structural declines in the energy sector.
  • In 2017 the fund proposed substantial reductions in its oil and gas equity benchmark, a recommendation that led to policy decisions on divestment and benchmark adjustments.

Historical notes

  • GPFN (the domestic fund) traces back to 1967 as a national insurance reserve.
  • GPFG was established in 1990 to invest petroleum surpluses and has grown to become one of the world’s largest sovereign wealth funds.

Key takeaways

  • Norway’s Government Pension Fund comprises two complementary funds: a global “Oil Fund” (GPFG) and a domestic fund (GPFN).
  • The funds convert petroleum revenues into diversified investments to support long‑term fiscal and pension obligations.
  • Governance by the Ministry of Finance, management by NBIM and Folketrygdfondet, and ethical investment oversight are central to the funds’ operation.