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How Norway spends its $882B global fund

283 points by punnerud 10y ago

harryh 10y ago
882 B / 5.2 Million ~= $170k for every citizen of Norway. At 4% a year that's $6,800 each in annual income. Not bad!
- hellogoodbyeeee 10y ago
  The US would need 56 trillion to achieve the same level of per capita income
  - gok 10y ago
    Trillion (10^12), not quadrillion.
  - dogma1138 10y ago
    That's not a correct calculation, however the US has sovereign wealth funds which are usually administered on a state level and are usually orietned towards a specific funding goal (e.g. https://en.wikipedia.org/wiki/Permanent_School_Fund https://en.wikipedia.org/wiki/Permanent_School_Fund) , as well as social security. The Social Security Trust Fund is a sovereign wealth fund it's not called like that due to historic convention, but it does operate like one. Overall a pretty stark difference between the funds is the source and volatility of the revenue, US funds tend to be considerably more safe in those regards, and the how and where it is invested. 55-60% of Norway's (and there are calls to increase this to 70%) fund is invested in the international stock markets, US funds are for the most part invested locally (within the US) and in considerably less volatile commodities. A large scale financial crisis can erase much of Norway's SWF while having considerably less effect on US social security and state level SWF's.
    - mburns 10y ago
      >The Social Security Trust Fund is a sovereign wealth fund it's not called like that due to historic convention, but it does operate like one. Correct me if I'm wrong, but the SS Trust Fund has to exclusively buy Treasury bonds, while other sovereign funds make investments in the public stock markets, etc. Seems an important difference.
      - dogma1138 10y ago
        Different sovereign/public funds have different regulations, they are usually split between equity and fixed income, Norway splits it to 60% equity, 5% real estate, and 25% fixed income. As far as the fixed income goes most of it is invested in treasury bonds, while the equity is invested in primarily the international stock markets. Overall the Social Security Act does disallow prefunding of the fund with marketable investments but one of the reasons it hasn't been changed it's because it's actually a pretty solid policy, and the world for the most part also doesn't want the US to drop a 3 trillion dollars investment pinata on the global markets. Overall while there is a lot of clickbait that inflates the Norwegian one it is not a special case if you look at public fund rankings http://www.swfinstitute.org/fund-rankings/ http://www.swfinstitute.org/fund-rankings/ you'll see that the US Federal Pensions Fund and the California Reteirment Fund combined are about equal to the Norwegian National Fund, and those are just 2 funds. Overall pretty much every state in the US has multiple SWFs, public funds or similar investment ventures those are usually directed at a specific funding target e.g. retirement, public schools, universities, infrastructure etc. Each fund funds usually only a single thing and each fund has a different source of revenue and investment goals and regulations, for the most part based on how the US federal system works in general it's a better model. California isn't expected to fund education in Texas or pay for a new road in Wyoming and vise versa so each state runs their own funds to fund their own needs (there is some federal money involved) overall it's likely a slightly safer bet than putting all your eggs in a single basket. This is also why you simply can't blow up the Norway's fund to US levels and say you'll need 56 trillion dollars because the US doesn't pay for everything from a single fund. The Gross National Wealth of Norway including the fund is about 85% of the US one when adjusted per capita, Norway is rich, the fund is wonderful and very well performing but it's not some unheard of economic miracle that no one else is using ;)
- dogma1138 10y ago
  Not bad, but not enough to cover the current levels of household debt in Norway, while a large portion of the debt is tied to mortgages the mortgage debt in the Norway have been increasing faster than income for quite a few years now. http://www.tradingeconomics.com/norway/households-debt-to-gdp http://www.tradingeconomics.com/norway/households-debt-to-gd... This isn't a problem unique to Norway, Norway is just one of the biggest offenders, even in the Nordic countries there is a trend of creating a new generation or class of indentured citizens. Many EU countries need to look at germany and start reducing housing prices, one of the main contributors to Germany's low household debt is a 10 year cap on mortgages. Countries like Sweden and Norway just now starting to cap it, Sweden capped the mortgage term to 105 years (no this isn't a typo) this year and the current average mortgage term in Sweden is still over 140 years, and Norway isn't much better off (It was slightly higher than Sweden IIRC I just can't find a source atm). While the Nordic countries take pride in their model the current economics are pretty bad under the surface, you have a combination of inflated housing prices, extreme housing shortages, and mortgages that can span over 3 generations. To some extent the Nordic model isn't a choice it's an outcome of the economic policy to the point where a lot of people that appear to be wealthy are actually in dire debt and dependant on the state. http://www.telegraph.co.uk/personal-banking/mortgages/sweden-cuts-maximum-mortgage-term-to-105-years-the-average-is-14/ http://www.telegraph.co.uk/personal-banking/mortgages/sweden...
  - ricardonunez 10y ago
    Will that be the reason why Germany has one of the lowest home ownership rates?
    - dogma1138 10y ago
      Not the only reason, and most likely not the primary one. When adjusted for age Germany has a pretty solid house ownership rate. Germany is big and has a pretty mobile workforce, in many other countries you are considerably less likely to be moving every 2-5 years across large distances like you are in Germany. Overall the affordability of housing even when accounting for mortgages and required seed money is considerably better in Germany than in Norway, Sweden or Denmark, and while Germany does have about half the house ownership rate on paper it is also because rent is both available and affordable and is favored by the younger workforce. One can argue about what is better having to rent until you settle down at the age of 30-35, or buying a house at the age of 19 with decades of mortgage and only having to sell it to move into your parent's house which is still under mortgage. The house pricing in Oslo rivals NYC these days. Also while Germany does have a considerable below average age for the EU28, the highest / above average EU28 countries are not those which you would expect, those are the Eastern European countries like Romania, Poland, Hungary, Slovakia etc. countries which were in the USSR/Warsaw Pact or were under socialism at one point or another. When you give everyone in the country a home at some point in time you'll end up having very high homeownership rates even 50 years later.
- refurb 10y ago
  Norway also has foreign debt of greater than $600B or 75% of the Global Fund.
  - harryh 10y ago
    Interesting. Why do they choose to keep this money in a sovereign wealth fund instead of choosing to pay off their debt?
    - vertex-four 10y ago
      Likely because their debt comes on better terms than their income from their fund. Or their debt is structured in such a way that they can't pay it off until some time in the future.
    - Alupis 10y ago
      Because the debt doesn't necessarily harm their economy, and the fund can be put to better use than huge lump sum payments of a debt that doesn't impact Norway.
    - 0x0 10y ago
      From a random webpage http://www.nationaldebtclocks.org/debtclock/norway http://www.nationaldebtclocks.org/debtclock/norway - "NOTE The Norwegian central government is in a net asset position, i.e. the government’s total financial assets exceed the total debt. They borrow cheap to then re invest."
    - morgante 10y ago
      Because their return on investments in the fund should be higher than their debt interest.
    - bkanber 10y ago
      The Norwegian 10Y treasury bond has a coupon rate of 1.3% (lower than the US T-Note! suffice to say, very cheap). The wealth fund has been growing around 8% per year. Borrow money at a rate of 1.3%, reinvest it and make 8%. It's one of the golden rules of banking: if you can borrow money for cheap, do so.
kristofferR 10y ago
"It is run frugally and transparently" is a dubious claim, at least according to claims made on NRKs Folkeopplysningen (a show like Penn and Teller: Bullshit, just better). The fund spends a lot on being actively managed, one manager received ~$60 million in bonuses in 2010. However, they won't reply when people ask if bonuses are actually financially beneficial. https://tv.nrk.no/serie/folkeopplysningen/KMTE50009215/sesong-3/episode-2 https://tv.nrk.no/serie/folkeopplysningen/KMTE50009215/seson... @ 28:30
- pveierland 10y ago
  Anecdotally; I spoke to a person from "Norges Bank Investment Management" today at a careers fair about this issue, and apparently this example of using active external investors is something that they have been avoiding since, and that the magnitudes of their internal bonuses are far more restrictive.
  - TuringNYC 10y ago
    This is a very good point. A very simple scenario would be that all the money is placed in super-thrifty ETFs with .05% fees. When you have figures as high as $882B, those outside management fees get large. In this case, it would be 441M!
- cloudjacker 10y ago
  It's because financial transparency doesn't have allot of competition, it's a low bar to say and do some transparent things Anyway, that manager needs to negotiate a better deal if they only get 60m annually with almost a trillion AUM
- charlesdm 10y ago
  $60m isn't exactly the real cost to the government, though? Assuming this asset manager is a Norwegian resident, he'll pay a ton of tax (income or corporate tax, VAT, stamp duty on property purchases, capital gains, etc etc) on that money, and eventually given enough time, most will just flow back to the government. The house always wins.. Also, it depends on how much he brings in. For example, there are US based asset managers with private funds that generate 20-30-40% per annum, for over 20 years. If the performance is there, they should get compensated well for that. Otherwise, why put up with the stress of managing billions of dollars?
Lythimus 10y ago
Is there an index or ETF which follows this pension fund's investments?
- anthonybsd 10y ago
  No. The up-to-date composition of the fund is not public nor should it be due to the very real possibility of moving the markets in unintended ways. However, they do publish annual reports of investments which you can access on their website. Here's a 2015 one: https://www.nbim.no/contentassets/70de238e3f6747228b76a99ec24c53ed/annual_report_2015_web2.pdf https://www.nbim.no/contentassets/70de238e3f6747228b76a99ec2...
cs702 10y ago
A little over decade ago, when Norway's fund was called "the Petroleum Fund" and had "only" $147B, an article in Slate magazine explained what was special about it: "Norway has pursued a classically Scandinavian solution. It has viewed oil revenues as a temporary, collectively owned windfall that, instead of spurring consumption today, can be used to insulate the country from the storms of the global economy and provide a thick, goose-down cushion for the distant day when the oil wells run dry."[1] Since then, the fund has grown six-fold. [1] http://www.slate.com/articles/business/moneybox/2004/10/avoiding_the_oil_curse.html http://www.slate.com/articles/business/moneybox/2004/10/avoi...
- tim333 10y ago
  It's kind of funny that the classically Scandinavian solution was mostly the work of an Iraqi geologist http://www.cbc.ca/radio/thesundayedition/the-public-god-forum-farouk-al-kasim-the-man-behind-norway-s-oil-wealth-listener-mail-documentary-the-tracks-1.2905028/farouk-al-kasim-the-man-behind-norway-s-oil-wealth-1.2905029 http://www.cbc.ca/radio/thesundayedition/the-public-god-foru...
  - distances 10y ago
    I think similar ideas are found all over the world, but few countries outside of Northern Europe have the necessary political responsibility and lack of corruption to actually execute successfully on these ideas.
    - patrickk 10y ago
      In Ireland we had a sovereign wealth fund for pensions, called the National Pensions Reserve Fund. The government raided it to pay for budget shortfalls caused by offering a blanket, virtually unconditional guarantee to (private sector) bank debts, even unsecured bank debts, caused by the collapse in the Irish property market in 2008. The insane loans issued were made whole by the taxpayer at enormous cost to the wider economy. Of course, very little of those involved actually went to prison, although some higher ups in Anglo Irish (described as the worst bank in the world, even worse than Icelandic banks) were eventually, after many years, sent to prison [2]. The CEO of Anglo was even acquitted by a jury! "The NPRF’s asset base had increased to over €22 billion in 2009. However, following the economic and banking collapse, its assets have been diverted as successive governments raided it to fund programmes or help meet the State’s fiscal commitments during the crisis." This is a long way of saying that even in Northern Europe incompetence and fraud is possible. I wish we had the competence and level of societal trust the Norwegians have. [1] http://www.irishtimes.com/news/politics/national-pension-reserve-fund-should-now-be-revived-says-brian-hayes-1.2119297 http://www.irishtimes.com/news/politics/national-pension-res... [2] http://www.irishtimes.com/business/financial-services/anglo-trial-three-ex-bankers-jailed-over-7bn-fraud-1.2738637 http://www.irishtimes.com/business/financial-services/anglo-...
netcan 10y ago
Norway's oil money story is one of the weirdest. Are there any examples in history where a country has saved up such a big stash? Are they planning to retire young, as a nation?
- webbore 10y ago
  I live in Calgary, Alberta which is pretty much the exact counterpoint to Norway with a very similar historical starting point (size, population, dynamics). It doesn't matter who's in power, all our governments spend like drunken sailors on shore-leave, no sales tax to even out the boom/bust (and counter low-ish taxes), A savings fund that is now empty going into an incredibly rough period. I'm not says one is better than the other - Norway looks great right now, but didn't when I visited ~10 years ago and my Subway "value" meal cost over $25 CDN - just an interesting counterpoint. I keep waiting for that manufacturing "bump" from Eastern Canada we were promised from a sinking dollar...
  - digi_owl 10y ago
    > I'm not says one is better than the other - Norway looks great right now, but didn't when I visited ~10 years ago and my Subway "value" meal cost over $25 CDN - just an interesting counterpoint. Careful with such examples. Local prices are first of all adjusted for local wages, and second of all the NOK exchange rate is just nasty.
  - refurb 10y ago
    Alberta did spend most of the their oil money. Based on a Google search, it looks like the Heritage Trust Fund maxed out at ~$20B for a population of ~2.5M. So maybe 1/20th of what Norway has put away on a per capita basis?
  - Vinkekatten 10y ago
    Not sure if relevant, but in Oslo today a half-foot sub-of-the-day with no drinks runs you $5.50 canadian. A big mac with a menu is $14.50
- maus42 10y ago
terda12 10y ago
Visiting Norway, I always thought it is kind of a weird country. On one hand it's one of the richest countries in the world. On the other hand, I've seen so many young Norwegian women work hard cleaning toilets and hotel rooms. Such jobs would be considered "low rung" at in the US but in Norway they treat their low rung jobs as something to be proud of.
- seizethecheese 10y ago
  Someone has to clean the toilets. You're expressing shock that Norway doesn't have a racial underclass like latinos or blacks in the US? Kind of a weird thing to comment on, Norway is a very homogenous country.
  - kinkora 10y ago
    Did the OP edit the original comment? I don't see any mention of race and the OP is just stating he is impressed by how Norwegian women take pride in doing even the most menial of jobs (which is something I noted too when I was there). Just found it strange how did you come to the conclusion of a "racial underclass" when there was no mention of it so i was wondering if it is an american thing. Note: While not as multi-cultural as the US of course, Norway is not exclusively a "homogeneous" society and in fact, I just noted that almost 1/3 of my Norwegian friends are not "Nordic born". You obviously haven't been there if you made that conclusion yourself.
    - meric 10y ago
      Who else would work those jobs if not Norwegians? It's implied if they didn't another group would do it.
- flurdy 10y ago
  That may also be due to the egalitarian nature of Norway, the gap between the lowest and highest paid jobs are not that large. If you remove the statistical anomalies. So any job will allow you to live a similar life as your neighbors whom may have a more "perceived" glamorous job. There really isn't much of a working class nor upper class, just variations of a huge middle class. Though I am not sure I share you opinion on who does the cleaning though. Maybe in a more rural hotel that is the case but whenever I go back to the Oslo especially more recently nearly all the "low rung" jobs are done by recent immigrants. I noticed hotels seemed to be mostly eastern Europeans, offices a mix of Somali, Vietnamese etc and in restaurants mostly Swedes. There certainly was often discussions in the media of Norwegian youth being too spoilt for those jobs and the country depended on over qualified immigrants to fill these necessary roles. This may also be the case in many other countries.
rer 10y ago
In the "Top of the World" graph in the article, there's a dip for Saudi Arabia. Does anyone know why?
- ars 10y ago
  That when SA started "attacking" Iran and Russia (the countries), and the US and Canadian oil industries (not the countries), by reducing oil prices. They started drawing from their fund to continue paying for all the entitlements their citizens expect. They calculate they can ride it out longer than the rest because of their fund. So far they are correct.
- hjnilsson 10y ago
  Saudi Arabia significantly cut the oil price (which caused the global dip), and is since making up the difference by withdrawing from the oil fund. The long term goal here is not entirely clear, but it mostly seems like a way to hurt the Russian economy and the fracking industry.
  - forgetsusername 10y ago
    >Saudi Arabia significantly cut the oil price (which caused the global dip) Saudi Arabia can't cut the price of oil. They can increase or decrease their own (albeit large proportional) supply.
shardinator 10y ago
Related to a lot of discussion comments, I highly recommend "A Random Walk Down Wallstreet" by Burton Malkiel. https://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393330338 https://www.amazon.com/Random-Walk-Down-Wall-Street/dp/03933...
atheg33 10y ago
As a Canadian I feel so cheated learning about Norway's Oil Fund. Our government hasn't hardly saved a dime of our Oil Income. We have been taking a small cut of the hundreds of thousands of barrels of oil we have been producing daily for the past 100+ years and spending it as fast as we possibly can. >Most of the oil companies exploring for oil in Alberta were of U.S. origin, and at its peak in 1973, over 78 per cent of Canadian oil and gas production was under foreign ownership and over 90 per cent of oil and gas production companies were under foreign control, mostly American. [0] [0] https://en.wikipedia.org/wiki/Petroleum_production_in_Canada#History https://en.wikipedia.org/wiki/Petroleum_production_in_Canada...
- gaius 10y ago
  We have been taking a small cut of the hundreds of thousands of barrels of oil we have been producing daily for the past 100+ years and spending it as fast as we possibly can. Right, but the money was spent on something tho'. So the question - and I don't know the answer - is whether having that thing, at the time, was worth more than having something else, in the future.
  - atheg33 10y ago
    It just seems like if we had of kept the money and re-invested it... like Norway did... that we would have been much better off in the long run.
    - gaius 10y ago
      We could ask the same question in the UK. Successive governments believed in using the money to lower taxes instead. Whether that was right or wrong no-one can really say - but consider that around the time the North Sea came online, income tax was as high as 83% and tax on income from investments was 98%. http://www.spectator.co.uk/2008/04/why-hasnt-britain-got-a-sovereign-wealth-fund/ http://www.spectator.co.uk/2008/04/why-hasnt-britain-got-a-s...
known 10y ago
You can't beat http://www.bloomberg.com/news/features/2016-05-30/the-untold-story-behind-saudi-arabia-s-41-year-u-s-debt-secret http://www.bloomberg.com/news/features/2016-05-30/the-untold...
rogaha 10y ago
I see lots of comments talking about the return on investment (~4% YoY) and the ~$60M in bonuses, etc. But I don't see anyone questioning why there is so much money invested in other companies outside Norway. I'm curious to know: 1) Why do we have a savings Fund with double of the annual GDP? Should we have a limit? Why the excess is not invested locally? 2) Is there an existing plan to define when the money will be directed to the Norway economy? The current GDP per capita is around $68K which doesn't seem that much compared to the amount of money in the country's saving account. Why not invest in education and/or technology? 3) Why there are a few people earning so much money (e.g. ~$60M bonus) to manage the country's assets? Is the real purpose to make money or save the money for future generations?

283 points by punnerud 10y ago

harryh 10y ago

882 B / 5.2 Million ~= $170k for every citizen of Norway. At 4% a year that's $6,800 each in annual income. Not bad!

hellogoodbyeeee 10y ago
The US would need 56 trillion to achieve the same level of per capita income
- gok 10y ago
  Trillion (10^12), not quadrillion.
- dogma1138 10y ago
  That's not a correct calculation, however the US has sovereign wealth funds which are usually administered on a state level and are usually orietned towards a specific funding goal (e.g. https://en.wikipedia.org/wiki/Permanent_School_Fund https://en.wikipedia.org/wiki/Permanent_School_Fund) , as well as social security. The Social Security Trust Fund is a sovereign wealth fund it's not called like that due to historic convention, but it does operate like one. Overall a pretty stark difference between the funds is the source and volatility of the revenue, US funds tend to be considerably more safe in those regards, and the how and where it is invested. 55-60% of Norway's (and there are calls to increase this to 70%) fund is invested in the international stock markets, US funds are for the most part invested locally (within the US) and in considerably less volatile commodities. A large scale financial crisis can erase much of Norway's SWF while having considerably less effect on US social security and state level SWF's.
  - mburns 10y ago
    >The Social Security Trust Fund is a sovereign wealth fund it's not called like that due to historic convention, but it does operate like one. Correct me if I'm wrong, but the SS Trust Fund has to exclusively buy Treasury bonds, while other sovereign funds make investments in the public stock markets, etc. Seems an important difference.
    - dogma1138 10y ago
      Different sovereign/public funds have different regulations, they are usually split between equity and fixed income, Norway splits it to 60% equity, 5% real estate, and 25% fixed income. As far as the fixed income goes most of it is invested in treasury bonds, while the equity is invested in primarily the international stock markets. Overall the Social Security Act does disallow prefunding of the fund with marketable investments but one of the reasons it hasn't been changed it's because it's actually a pretty solid policy, and the world for the most part also doesn't want the US to drop a 3 trillion dollars investment pinata on the global markets. Overall while there is a lot of clickbait that inflates the Norwegian one it is not a special case if you look at public fund rankings http://www.swfinstitute.org/fund-rankings/ http://www.swfinstitute.org/fund-rankings/ you'll see that the US Federal Pensions Fund and the California Reteirment Fund combined are about equal to the Norwegian National Fund, and those are just 2 funds. Overall pretty much every state in the US has multiple SWFs, public funds or similar investment ventures those are usually directed at a specific funding target e.g. retirement, public schools, universities, infrastructure etc. Each fund funds usually only a single thing and each fund has a different source of revenue and investment goals and regulations, for the most part based on how the US federal system works in general it's a better model. California isn't expected to fund education in Texas or pay for a new road in Wyoming and vise versa so each state runs their own funds to fund their own needs (there is some federal money involved) overall it's likely a slightly safer bet than putting all your eggs in a single basket. This is also why you simply can't blow up the Norway's fund to US levels and say you'll need 56 trillion dollars because the US doesn't pay for everything from a single fund. The Gross National Wealth of Norway including the fund is about 85% of the US one when adjusted per capita, Norway is rich, the fund is wonderful and very well performing but it's not some unheard of economic miracle that no one else is using ;)
dogma1138 10y ago
Not bad, but not enough to cover the current levels of household debt in Norway, while a large portion of the debt is tied to mortgages the mortgage debt in the Norway have been increasing faster than income for quite a few years now. http://www.tradingeconomics.com/norway/households-debt-to-gdp http://www.tradingeconomics.com/norway/households-debt-to-gd... This isn't a problem unique to Norway, Norway is just one of the biggest offenders, even in the Nordic countries there is a trend of creating a new generation or class of indentured citizens. Many EU countries need to look at germany and start reducing housing prices, one of the main contributors to Germany's low household debt is a 10 year cap on mortgages. Countries like Sweden and Norway just now starting to cap it, Sweden capped the mortgage term to 105 years (no this isn't a typo) this year and the current average mortgage term in Sweden is still over 140 years, and Norway isn't much better off (It was slightly higher than Sweden IIRC I just can't find a source atm). While the Nordic countries take pride in their model the current economics are pretty bad under the surface, you have a combination of inflated housing prices, extreme housing shortages, and mortgages that can span over 3 generations. To some extent the Nordic model isn't a choice it's an outcome of the economic policy to the point where a lot of people that appear to be wealthy are actually in dire debt and dependant on the state. http://www.telegraph.co.uk/personal-banking/mortgages/sweden-cuts-maximum-mortgage-term-to-105-years-the-average-is-14/ http://www.telegraph.co.uk/personal-banking/mortgages/sweden...
- ricardonunez 10y ago
  Will that be the reason why Germany has one of the lowest home ownership rates?
  - dogma1138 10y ago
    Not the only reason, and most likely not the primary one. When adjusted for age Germany has a pretty solid house ownership rate. Germany is big and has a pretty mobile workforce, in many other countries you are considerably less likely to be moving every 2-5 years across large distances like you are in Germany. Overall the affordability of housing even when accounting for mortgages and required seed money is considerably better in Germany than in Norway, Sweden or Denmark, and while Germany does have about half the house ownership rate on paper it is also because rent is both available and affordable and is favored by the younger workforce. One can argue about what is better having to rent until you settle down at the age of 30-35, or buying a house at the age of 19 with decades of mortgage and only having to sell it to move into your parent's house which is still under mortgage. The house pricing in Oslo rivals NYC these days. Also while Germany does have a considerable below average age for the EU28, the highest / above average EU28 countries are not those which you would expect, those are the Eastern European countries like Romania, Poland, Hungary, Slovakia etc. countries which were in the USSR/Warsaw Pact or were under socialism at one point or another. When you give everyone in the country a home at some point in time you'll end up having very high homeownership rates even 50 years later.
refurb 10y ago
Norway also has foreign debt of greater than $600B or 75% of the Global Fund.
- harryh 10y ago
  Interesting. Why do they choose to keep this money in a sovereign wealth fund instead of choosing to pay off their debt?
  - vertex-four 10y ago
    Likely because their debt comes on better terms than their income from their fund. Or their debt is structured in such a way that they can't pay it off until some time in the future.
  - Alupis 10y ago
    Because the debt doesn't necessarily harm their economy, and the fund can be put to better use than huge lump sum payments of a debt that doesn't impact Norway.
  - 0x0 10y ago
    From a random webpage http://www.nationaldebtclocks.org/debtclock/norway http://www.nationaldebtclocks.org/debtclock/norway - "NOTE The Norwegian central government is in a net asset position, i.e. the government’s total financial assets exceed the total debt. They borrow cheap to then re invest."
  - morgante 10y ago
    Because their return on investments in the fund should be higher than their debt interest.
  - bkanber 10y ago
    The Norwegian 10Y treasury bond has a coupon rate of 1.3% (lower than the US T-Note! suffice to say, very cheap). The wealth fund has been growing around 8% per year. Borrow money at a rate of 1.3%, reinvest it and make 8%. It's one of the golden rules of banking: if you can borrow money for cheap, do so.

kristofferR 10y ago

"It is run frugally and transparently" is a dubious claim, at least according to claims made on NRKs Folkeopplysningen (a show like Penn and Teller: Bullshit, just better). The fund spends a lot on being actively managed, one manager received ~$60 million in bonuses in 2010. However, they won't reply when people ask if bonuses are actually financially beneficial. https://tv.nrk.no/serie/folkeopplysningen/KMTE50009215/sesong-3/episode-2 https://tv.nrk.no/serie/folkeopplysningen/KMTE50009215/seson... @ 28:30

pveierland 10y ago
Anecdotally; I spoke to a person from "Norges Bank Investment Management" today at a careers fair about this issue, and apparently this example of using active external investors is something that they have been avoiding since, and that the magnitudes of their internal bonuses are far more restrictive.
- TuringNYC 10y ago
  This is a very good point. A very simple scenario would be that all the money is placed in super-thrifty ETFs with .05% fees. When you have figures as high as $882B, those outside management fees get large. In this case, it would be 441M!
cloudjacker 10y ago
It's because financial transparency doesn't have allot of competition, it's a low bar to say and do some transparent things Anyway, that manager needs to negotiate a better deal if they only get 60m annually with almost a trillion AUM
charlesdm 10y ago
$60m isn't exactly the real cost to the government, though? Assuming this asset manager is a Norwegian resident, he'll pay a ton of tax (income or corporate tax, VAT, stamp duty on property purchases, capital gains, etc etc) on that money, and eventually given enough time, most will just flow back to the government. The house always wins.. Also, it depends on how much he brings in. For example, there are US based asset managers with private funds that generate 20-30-40% per annum, for over 20 years. If the performance is there, they should get compensated well for that. Otherwise, why put up with the stress of managing billions of dollars?

Lythimus 10y ago

Is there an index or ETF which follows this pension fund's investments?

anthonybsd 10y ago
No. The up-to-date composition of the fund is not public nor should it be due to the very real possibility of moving the markets in unintended ways. However, they do publish annual reports of investments which you can access on their website. Here's a 2015 one: https://www.nbim.no/contentassets/70de238e3f6747228b76a99ec24c53ed/annual_report_2015_web2.pdf https://www.nbim.no/contentassets/70de238e3f6747228b76a99ec2...

cs702 10y ago

A little over decade ago, when Norway's fund was called "the Petroleum Fund" and had "only" $147B, an article in Slate magazine explained what was special about it: "Norway has pursued a classically Scandinavian solution. It has viewed oil revenues as a temporary, collectively owned windfall that, instead of spurring consumption today, can be used to insulate the country from the storms of the global economy and provide a thick, goose-down cushion for the distant day when the oil wells run dry."[1] Since then, the fund has grown six-fold. [1] http://www.slate.com/articles/business/moneybox/2004/10/avoiding_the_oil_curse.html http://www.slate.com/articles/business/moneybox/2004/10/avoi...

tim333 10y ago
It's kind of funny that the classically Scandinavian solution was mostly the work of an Iraqi geologist http://www.cbc.ca/radio/thesundayedition/the-public-god-forum-farouk-al-kasim-the-man-behind-norway-s-oil-wealth-listener-mail-documentary-the-tracks-1.2905028/farouk-al-kasim-the-man-behind-norway-s-oil-wealth-1.2905029 http://www.cbc.ca/radio/thesundayedition/the-public-god-foru...
- distances 10y ago
  I think similar ideas are found all over the world, but few countries outside of Northern Europe have the necessary political responsibility and lack of corruption to actually execute successfully on these ideas.
  - patrickk 10y ago
    In Ireland we had a sovereign wealth fund for pensions, called the National Pensions Reserve Fund. The government raided it to pay for budget shortfalls caused by offering a blanket, virtually unconditional guarantee to (private sector) bank debts, even unsecured bank debts, caused by the collapse in the Irish property market in 2008. The insane loans issued were made whole by the taxpayer at enormous cost to the wider economy. Of course, very little of those involved actually went to prison, although some higher ups in Anglo Irish (described as the worst bank in the world, even worse than Icelandic banks) were eventually, after many years, sent to prison [2]. The CEO of Anglo was even acquitted by a jury! "The NPRF’s asset base had increased to over €22 billion in 2009. However, following the economic and banking collapse, its assets have been diverted as successive governments raided it to fund programmes or help meet the State’s fiscal commitments during the crisis." This is a long way of saying that even in Northern Europe incompetence and fraud is possible. I wish we had the competence and level of societal trust the Norwegians have. [1] http://www.irishtimes.com/news/politics/national-pension-reserve-fund-should-now-be-revived-says-brian-hayes-1.2119297 http://www.irishtimes.com/news/politics/national-pension-res... [2] http://www.irishtimes.com/business/financial-services/anglo-trial-three-ex-bankers-jailed-over-7bn-fraud-1.2738637 http://www.irishtimes.com/business/financial-services/anglo-...

netcan 10y ago

Norway's oil money story is one of the weirdest. Are there any examples in history where a country has saved up such a big stash? Are they planning to retire young, as a nation?

webbore 10y ago
I live in Calgary, Alberta which is pretty much the exact counterpoint to Norway with a very similar historical starting point (size, population, dynamics). It doesn't matter who's in power, all our governments spend like drunken sailors on shore-leave, no sales tax to even out the boom/bust (and counter low-ish taxes), A savings fund that is now empty going into an incredibly rough period. I'm not says one is better than the other - Norway looks great right now, but didn't when I visited ~10 years ago and my Subway "value" meal cost over $25 CDN - just an interesting counterpoint. I keep waiting for that manufacturing "bump" from Eastern Canada we were promised from a sinking dollar...
- digi_owl 10y ago
  > I'm not says one is better than the other - Norway looks great right now, but didn't when I visited ~10 years ago and my Subway "value" meal cost over $25 CDN - just an interesting counterpoint. Careful with such examples. Local prices are first of all adjusted for local wages, and second of all the NOK exchange rate is just nasty.
- refurb 10y ago
  Alberta did spend most of the their oil money. Based on a Google search, it looks like the Heritage Trust Fund maxed out at ~$20B for a population of ~2.5M. So maybe 1/20th of what Norway has put away on a per capita basis?
- Vinkekatten 10y ago
  Not sure if relevant, but in Oslo today a half-foot sub-of-the-day with no drinks runs you $5.50 canadian. A big mac with a menu is $14.50
maus42 10y ago

terda12 10y ago

Visiting Norway, I always thought it is kind of a weird country. On one hand it's one of the richest countries in the world. On the other hand, I've seen so many young Norwegian women work hard cleaning toilets and hotel rooms. Such jobs would be considered "low rung" at in the US but in Norway they treat their low rung jobs as something to be proud of.

seizethecheese 10y ago
Someone has to clean the toilets. You're expressing shock that Norway doesn't have a racial underclass like latinos or blacks in the US? Kind of a weird thing to comment on, Norway is a very homogenous country.
- kinkora 10y ago
  Did the OP edit the original comment? I don't see any mention of race and the OP is just stating he is impressed by how Norwegian women take pride in doing even the most menial of jobs (which is something I noted too when I was there). Just found it strange how did you come to the conclusion of a "racial underclass" when there was no mention of it so i was wondering if it is an american thing. Note: While not as multi-cultural as the US of course, Norway is not exclusively a "homogeneous" society and in fact, I just noted that almost 1/3 of my Norwegian friends are not "Nordic born". You obviously haven't been there if you made that conclusion yourself.
  - meric 10y ago
    Who else would work those jobs if not Norwegians? It's implied if they didn't another group would do it.
flurdy 10y ago
That may also be due to the egalitarian nature of Norway, the gap between the lowest and highest paid jobs are not that large. If you remove the statistical anomalies. So any job will allow you to live a similar life as your neighbors whom may have a more "perceived" glamorous job. There really isn't much of a working class nor upper class, just variations of a huge middle class. Though I am not sure I share you opinion on who does the cleaning though. Maybe in a more rural hotel that is the case but whenever I go back to the Oslo especially more recently nearly all the "low rung" jobs are done by recent immigrants. I noticed hotels seemed to be mostly eastern Europeans, offices a mix of Somali, Vietnamese etc and in restaurants mostly Swedes. There certainly was often discussions in the media of Norwegian youth being too spoilt for those jobs and the country depended on over qualified immigrants to fill these necessary roles. This may also be the case in many other countries.

rer 10y ago

In the "Top of the World" graph in the article, there's a dip for Saudi Arabia. Does anyone know why?

ars 10y ago
That when SA started "attacking" Iran and Russia (the countries), and the US and Canadian oil industries (not the countries), by reducing oil prices. They started drawing from their fund to continue paying for all the entitlements their citizens expect. They calculate they can ride it out longer than the rest because of their fund. So far they are correct.
hjnilsson 10y ago
Saudi Arabia significantly cut the oil price (which caused the global dip), and is since making up the difference by withdrawing from the oil fund. The long term goal here is not entirely clear, but it mostly seems like a way to hurt the Russian economy and the fracking industry.
- forgetsusername 10y ago
  >Saudi Arabia significantly cut the oil price (which caused the global dip) Saudi Arabia can't cut the price of oil. They can increase or decrease their own (albeit large proportional) supply.

shardinator 10y ago

Related to a lot of discussion comments, I highly recommend "A Random Walk Down Wallstreet" by Burton Malkiel. https://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393330338 https://www.amazon.com/Random-Walk-Down-Wall-Street/dp/03933...

atheg33 10y ago

As a Canadian I feel so cheated learning about Norway's Oil Fund. Our government hasn't hardly saved a dime of our Oil Income. We have been taking a small cut of the hundreds of thousands of barrels of oil we have been producing daily for the past 100+ years and spending it as fast as we possibly can. >Most of the oil companies exploring for oil in Alberta were of U.S. origin, and at its peak in 1973, over 78 per cent of Canadian oil and gas production was under foreign ownership and over 90 per cent of oil and gas production companies were under foreign control, mostly American. [0] [0] https://en.wikipedia.org/wiki/Petroleum_production_in_Canada#History https://en.wikipedia.org/wiki/Petroleum_production_in_Canada...

gaius 10y ago
We have been taking a small cut of the hundreds of thousands of barrels of oil we have been producing daily for the past 100+ years and spending it as fast as we possibly can. Right, but the money was spent on something tho'. So the question - and I don't know the answer - is whether having that thing, at the time, was worth more than having something else, in the future.
- atheg33 10y ago
  It just seems like if we had of kept the money and re-invested it... like Norway did... that we would have been much better off in the long run.
  - gaius 10y ago
    We could ask the same question in the UK. Successive governments believed in using the money to lower taxes instead. Whether that was right or wrong no-one can really say - but consider that around the time the North Sea came online, income tax was as high as 83% and tax on income from investments was 98%. http://www.spectator.co.uk/2008/04/why-hasnt-britain-got-a-sovereign-wealth-fund/ http://www.spectator.co.uk/2008/04/why-hasnt-britain-got-a-s...

known 10y ago

You can't beat http://www.bloomberg.com/news/features/2016-05-30/the-untold-story-behind-saudi-arabia-s-41-year-u-s-debt-secret http://www.bloomberg.com/news/features/2016-05-30/the-untold...

rogaha 10y ago

I see lots of comments talking about the return on investment (~4% YoY) and the ~$60M in bonuses, etc. But I don't see anyone questioning why there is so much money invested in other companies outside Norway. I'm curious to know: 1) Why do we have a savings Fund with double of the annual GDP? Should we have a limit? Why the excess is not invested locally? 2) Is there an existing plan to define when the money will be directed to the Norway economy? The current GDP per capita is around $68K which doesn't seem that much compared to the amount of money in the country's saving account. Why not invest in education and/or technology? 3) Why there are a few people earning so much money (e.g. ~$60M bonus) to manage the country's assets? Is the real purpose to make money or save the money for future generations?