Norwegian Sovereign Wealth Fund Explained

When Norway Dug Out Their Oil

10,927,618,075,151 – Norwegian Kroner

As of writing this – 02/01/2021 – the fund is valued in the triilliiions….

It was only a couple of generations ago that Norwegians were among the poorest people of Europe. With a small population, just a tick over five million and an extremely rural, distributed population, the history of Norway has been one of tough work in cold places.

The Norwegians couldn’t rely on their government even if they wanted to. The economy only produced one thing that the rest of the world was interested in buying and apart from Salmon, Norway’s economic history was pretty bleak. They would look at their Scandinavian neighbours with jealousy as Denmark and Sweden thrived with prosperous economies.

It was in the 20th century alongside industry innovations in oil that Norway spilled over to become one of Europe’s richest nations.

Where Does The Money For The Sovereign Wealth Fund Come From?

What Is The Norwegian Sovereign Wealth Fund?

The fund started in 1990. The goal was to secure a safety hedge from the inordinate wealth created by Norway’s oil industry. Said in the fund’s own wordsThe aim of the oil fund is to ensure responsible and long-term management of revenue from Norway’s oil and gas resources in the North Sea so that this wealth benefits both current and future generations. The fund’s formal name is the Government Pension Fund Global.

Norway took excess funds found in their budget surplus and committed it to investment vehicle whose profits and value is wholly owned by the Norwegian people and managed by employees of the state.

A budget surplus, just quickly in case you are unsure, is when the government income (taxes + other revenue) is more than government costs (welfare, military, aid, infrastructure, etc). Since Norway’s state-owned and private oil companies were generating such significant revenue, the tax receipts the Norwegian government received (and continue to receive) created a situation where the government had leftover money after it had taken care of its people.

10,927,618,075,151 – Norwegian Kroner

30 years later and the fund has exploded in value. It is one of the largest funds (by value) in the world. It has more or less secured Norway’s independent wealth for the foreseeable future. The idea of the fund is such that if the world moves away from oil and demand for NOK and the Norwegian economy overnight then the people of the country will not experience to dramatic a change in living standards.

I actually have a semi-controversial prediction for the future of the fund and its implications for politics in both Norway and Europe. LEAVE A COMMENT ON THIS POST AND I WILL RESPOND WITH THE PREDICTION. 🙂 🙂

Interesting Facts About The Norwegian Sovereign Wealth Fund.

  • It is an environmentally conscious fund (ironic since its foundation is from oil profits). The Fund withdrew from all environmentally unsustainable positions in the last few years which signals a move towards conscious investing over pure profits.
  • The fund owns >1.5% of all shares in the worlds listed companies.
  • Some of the best investment managers in the world work for the fund across numerous offices the world over.
  • The fund is widely diversified. They own 100’s of buildings in the worlds biggest cities as well as loan money to governments and businesses.
  • They are the largest sovereign wealth fund in the world. Which is incredible since they represent one of the smallest countries in the world.

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