The Norwegian Sovereign Wealth Fund: A bench mark for Guyana’s Natural Resource Fund

Norway flag

The following entry has been submitted by Andre Brandli, a Guyanese living in Switzerland.

The Norwegian Sovereign Wealth Fund should serve as the bench mark for Guyana’s Natural Resource Fund

The readers of Guyanese Online, who follow current affairs in Guyana, may have noticed that the new government will not accept the Natural Resource Fund Act in its current form and will either repeal or amend it sometime early next year, Minister of Natural Resources Vickram Bharat has said ( The Natural Resources Fund is fed by the Guyanese oil revenues and needs to be managed with utter care and taken out of political interference.

The article below entitled “Norway’s billion dollar fund as a model for small private investors” was written by Ingrid Meissl Arebo for the Neue Zürcher Zeitung, Switzerland’s leading newspaper established in 1780. The article was published on September 24, 2020. It describes the inner workings of the Norwegian Sovereign Wealth Fund, which is fed by the country’s oil revenues. It is probably the best example of a well-managed sovereign wealth fund and we all should hope that the Guyanese equivalent will be managed with similar efficiency, transparency, and long-term success. Importantly, the Norwegian government can only spend the capital gains made with the fund’s assets. This provision ensures that the fund will not be depleted over time.  

I had the article translated from German to English as I believe that Guyanese people should get more information about the inner workings of the world’s most successful sovereign wealth fund. I also hope that the Norwegian example will trigger the implementation of similar checks and balances that have protected the Norwegian fund from political interference and depletion for almost 25 years.

I hope that the article by Ms. Arebo provides useful insights to the readers of Guyanese Online.

If you happen to know members of the Guyanese parliament and/or members of the new administration, please forward the article to them with the aim that the Guyanese equivalent, the Natural Resource Fund, will be protected from political interference and managed with similar efficiency, transparency, and long-term success. 

Andre Brandli

Norway’s billion-dollar fund as a model for small private investors

 The state oil fund invests long-term, broadly, sustainably, cost-effectively and regularly – a sensible strategy also for savers

Ingrid Meissl Årebo, Stockholm

Even the world’s largest sovereign wealth fund once started out small: At the end of May 1996, the Norwegian Ministry of Finance deposited the first 2 billion Norwegian Krone (NOK) in the oil fund. Its assets are intended as a cushion for worse times and should guarantee future generations a comfortable life when the oil wells in the North Sea run dry. Over the past quarter century, the black gold has injected over 3’220 billion NOK into the fund. Together with investment returns and currency gains, the nation’s piggy bank has grown to a staggering 10’400 billion NOK (1’120 billion USD). Those who want to know exactly, follow the live ticker on the homepage, where the 14-digit number adjusts to the respective market value in fractions of a second.

Yield and risk adjustment

Daily or even hourly monitoring of the asset is not recommended for small investors. Otherwise, however, the Norwegian financial vehicle of superlatives offers a lot of visual instruction even for those who do not have millions on the high side. The aim of the fund is to achieve the highest possible return with an acceptable risk. Thanks to the basically infinite investment horizon, market timing is a foreign concept: money inflows from the energy sector are invested continuously and independently of the mood on the markets. With regular saving and investing, the private investor also does well.

The operational management of the oil fund is delegated to Norges Bank Investment Management (NBIM), an organization within the central bank with 540 employees from 38 countries. In order to be able to make investment decisions close to the market, it is present not only in Oslo but also in the financial centers of London, New York, Singapore and Shanghai. However, this is not enough to be an expert in all areas. At the end of last year, the Oil Fund had awarded 83 mandates to external specialists in emerging markets and to small-cap experts.

Despite this concentrated manpower, the NBIM is subject to strict guidelines and controls; after all, a lot of money is at stake – money that belongs to the people. While Parliament sets the legal framework and must approve changes in strategy, the Ministry of Finance bears overall responsibility. After consultation with the central bank, it determines the investment strategy and must report annually to the people’s representatives on the development of the petrobillions.

In the childhood years, the Petroleum Fund was not allowed to invest more than 40% of its assets in securities; this limit has been gradually extended to 70% in order to achieve higher returns. At the end of June, fixed income securities made up 27.6% of the assets and real estate just under 3% (7% is allowed). However, the fund managers’ hands are tied. When creating their portfolios, they must take as their starting point the Treasury benchmark index, which is based on stock and bond indices of external players (FTSE Russell’s Global All Cap Stock Index or several Bloomberg Barclays bond indices). The risk limits are also specified: In a normal year, the volatility can be a maximum of 1.25 percentage points (0.58 points in mid-2020), while in times of crisis the yield may deviate from the benchmark by a maximum of -3.75% points.

The long investment horizon and low liquidity requirements make short-term fluctuations in value tolerable. Since the fund’s inception, the average annual return has been 5.8%; after deduction of administrative costs and inflation, the remaining 3.9%. This is just below the unofficial target: According to an unwritten and often strained rule of thumb, the government may channel no more than 4% of the fund’s assets into the national budget each year.

Today, the Oil Fund owns about 1.5% of the shares on the world’s stock exchanges; it has a global stake in 9’200 companies, often as the largest shareholder, and has set itself the goal of being an active owner. In 2019, the Norwegians attended over 11’518 shareholder meetings. Private investors cannot compete with these dimensions, but the SWF’s investment strategy can be broadly imitated. Those who want to invest like the Norwegians do, rely on broadly diversified, global exchange-traded funds (ETFs) – exchange-traded investment funds that passively and cost-effectively replicate indices.

While private investors tend to “home bias”, i.e. overweight domestic stocks in their investments, the Oil Fund is not allowed to invest domestically in order to avoid overheating the Norwegian economy. Compared with global equity funds, however, the “foreign state pension fund”, as it is officially called, has an overweight of European stocks; in mid-June, these accounted for 32%, with US stocks at 42%. At the end of June, the technology giants Microsoft, Apple, Amazon and Alphabet were the most important stock items in the fund portfolio, followed by Nestlé and Roche. Anyone wishing to find out more about the investment strategy, asset allocation and performance of the Oil Fund will find detailed information as well as general financial knowledge on the NBIM website.

The Petrofonds has committed itself to sustainable investment. Since 2004, an independent ethics board has been checking whether the investments comply with moral, social and environmental guidelines. Companies or countries that damage the environment, disregard human rights, allow child labor, produce weapons and tobacco or are corrupt are blacklisted (such as Airbus, Glencore and Philip Morris). The exclusion of oil and coal titles may seem paradoxical: While Norwegians draw their wealth from the non-renewable sources on the Norwegian continental shelf, investments in companies that make their money from fossil fuels are taboo for the fund.

The narrow scope for action and the low interest rate environment do not make it easy for the fund management to beat the benchmark. The average annual excess return is 0.23 percentage points, to which stock picking contributes a large part. To boost performance, the sovereign wealth fund wants to be able to participate in private financing rounds of promising companies in the future. In the IPOs of Spotify and Slack, for example, the Norwegians had to watch as institutional investors, who had previously provided the “unicorns” with capital, made substantial profits. The NBIM submitted an application to the Ministry of Finance a year ago, but it is likely to take some time before this is dealt with.

When the oil fund wanted to invest in real estate in order to increase returns, years passed before parliament gave the green light. It was not until 2010 that it was able to buy the first properties. This inertia is the price of the democratically anchored investment strategy. Time-critical decisions that go beyond the mandate are denied the NBIM. Private investors find it easier to adapt their investment strategy to new realities and make regular shifts.

A business of trust

Transparency and trust in the fund management are central. This explains the outcry that was triggered in the spring when Nicolai Tangen was appointed the new head of NBIM. The founder of the successful international hedge fund AKO Capital had no doubts about his professional qualifications, but many parliamentarians questioned the billionaire’s independence. One left-wing politician described him as a “walking conflict of interest”. The designated boss could only convince the critics of his good intentions when he gave up his life’s work and also transferred his private assets to savings accounts – a radical step that made Tangen 1 billion USD poorer. The job seemed worth it to him.

From the NZZ e-paper of 24.09.2020




From Wikipedia –

The Government Pension Fund of Norway comprises two entirely separate sovereign wealth funds owned by the government of Norway.

The Government Pension Fund Global, also known as the Oil Fund, was established in 1990 to invest the surplus revenues of the Norwegian petroleum sector. It has over US$1 trillion in assets, including 1.4% of global stocks and shares, making it the world’s largest sovereign wealth fund.[1][2] In May 2018, it was worth about $195,000 per Norwegian citizen.[3] It also holds portfolios of real estate and fixed-income investments. Many companies are excluded by the fund on ethical grounds.

The Government Pension Fund Norway is smaller and was established in 1967 as a type of national insurance fund. It is managed separately from the Oil Fund and is limited to domestic and Scandinavian investments and is therefore a key stock holder in many large Norwegian companies, predominantly via the Oslo Stock Exchange

Post a comment or leave a trackback: Trackback URL.


  • guyaneseonline  On 10/27/2020 at 12:31 am

    I read the the editorial in the Stabroek News regarding the Natural Reserve Fund. My conclusions are as follows:

    At present, the new government’s motivations calling for a repeal or amendments to the Natural Resource Fund (NRF) Act remain unclear. However, if the NRF is to be run along the lines of the hugely successful Norwegian Sovereign Wealth Fund, the government will only be able to spend the annual returns earned from the NRF, which is fed by the Guyana’s oil revenues. Since the inception of the Norwegian Sovereign Wealth Fund, the average annual return has been 5.8%; after deduction of administrative costs and inflation, the remaining 3.9%. The Guyanese NRF contains at present USD 150 million. Assuming a similar annual return on investment, the Guyanese government would have about USD 6 million to spend this year. This will fall far short of what is needed to cover the huge budget deficit in the making since President Ali took power…

  • brandli62  On 10/27/2020 at 5:29 am

    If you happen to know members of the Guyanese parliament and/or members of the new administration, please forward the article to them with the aim that the Guyanese equivalent, the Natural Resources Fund, will be protected from political interference and managed with similar efficiency, transparency, and long-term success.

  • Yvonne-K  On 10/27/2020 at 10:32 am

    Why do you think they plan to amend it? That plan calls for honesty, transparency and accountability. Those three words are not not in the govt’s vocabulary even though they included it in their campaign promises.

    • brandli62  On 10/27/2020 at 11:24 am

      Yvonne, if you think so then it’s time to act. We all need to make the Guyanese public aware of the threat to the Natural Resource Fund. The NRF is the best guarantee that the oil revenues will not be completely squandered. If the government is only allowed to withdraw the interest gained on its investment the damage is limited. We absolutely need to preserve or implement such a principle.

    • Yvonne-K  On 10/27/2020 at 7:44 pm

      What kind of power do you think the people have over this government that can be implemented in a peaceful way? They shouted and hollered over the election results and nothing came of it and on top of that, GECOM officials have been arrested and charged. The PPP supporters will do absolutely nothing to contest any amendments made and the rest of people will be ignored unless they face it full on with brute force and ignorance. Sad to say that’s the only way it will play out.

  • puigpantxin  On 10/27/2020 at 1:24 pm

    It is now over 10 years since Norway and Guyana signed the Memorandum of Understanding regarding deforestation of Guyana’s forests. Maybe Norway could be induced to become a mentor (provide expert advice) for Guyana’s Natural Resources Fund. I do share Yvonne-K’s misgivings, however.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s