Annual white paper on the Government Pension Fund

Results in 2022 

2022 was a volatile year in the financial markets, among other things as a result of increasing inflation and tightening of monetary policy internationally. Return on the investments in the Government Pension Fund Global (GPFG) and the Government Pension Fund Norway (GPFN) was -14.1 pct. and -4.4 pct., respectively.  This was, respectively, 0.87 and 0.71 percentage points higher than the return on the benchmarks set by the Ministry.

Despite weak markets, the market value of the GPFG increased with NOK 89 billion, to NOK 12 429 billion. This was due to significant revenues from the Norwegian petroleum sector deposited into the Fund and a weakening of the Norwegian krone (NOK). For the GPFN, market value at the end of 2022 was NOK 318 billion, a decrease of NOK 15 billion since the start of the year.

“We have seen a strong increase in the value of the Fund over several years, but have no guarantee that this will continue. Thankfully, we have competent and experienced people managing the Fund, combined with a long term investment strategy that we must remain committed to, also in more challenging times. This will serve us all in the long run“, says Minister of Finance Trygve Slagsvold Vedum (Centre Party).

The follow-up on NOU 2022: 12 The Fund in a changing world

A government-appointed Committee chaired by Dr. Ulf Sverdrup (Director of the Norwegian Institute of International Affairs) has reviewed developments that may be of relevance in the years ahead and the importance these may hold for the management of the GPFG. The Committee submitted its report in September 2022. The report has been circulated for public consultation.

The Committee is of the view that Norway has managed the petroleum resources and the GPFG wisely. The Fund has however benefited from favourable circumstances. International political and economic developments may however entail considerable changes, uncertainty and risk that may also affect the Fund. The Committee believes that the main principles behind the investment management model remain the best outset for addressing new risks. The report does not provide any basis for making changes to the investment strategy at the present time. The Committee’s assessments and analysis, together with the comments from the consultative bodies, will be included in the Ministry’s ongoing and future work on investment strategy and investment management development.

“The Government Pension Fund is important for the financing of public welfare for both current and future generations. The Government emphasises sound, good and long term management of the Pension Fund“, says the Minister of Finance.

Unlisted equities in the GPFG

Norges Bank may currently invest the GPFG in unlisted real estate and unlisted renewable energy infrastructure, but the mandate does not on a general basis allow for investments in unlisted equities. The Committee chaired by Ulf Sverdrup discussed various characteristics of unlisted investments. In its consultative comments, Norges Bank noted that an increasing share of global economic activity takes place in unlisted companies. The Bank has in a letter of 27 March 2023 been requested to examine various aspects of unlisted equities, as a basis for the Ministry’s further consideration.

Review of active management in the GPFN

The Ministry regularly reviews Folketrygdfondet’s management of the GPFN. The purpose of such reviews is, inter alia, to assess investment performance and whether the scope for deviations from the benchmark index, so-called active management, should be changed. In this year’s white paper, a new review is presented.

The review shows that Folketrygdfondet’s active management has resulted in an excess return of NOK 40 billion over the period 2007 to September 2022, after the deduction of investment management costs. This while the GPFN still being managed close to index.

The Ministry's assessment is that the management performance has been good overall, and that the GPFN should continue to be managed with a certain element of active management. The tracking error limit stipulated in the mandate is appropriate and well adapted to the management of the GPFN, and the Ministry proposes to keep the limit unchanged at 3 percentage points.

Read more: 

• The Government Pension Fund 2023 white paper