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Government Pension Fund – Global London, May 2008

Government Pension Fund – Global London, May 2008. Martin Skancke Director General Asset Management Department. The petroleum sector in relation to the Norwegian economy. 38 %. 25 %. 51 %. 24 %. The petroleum sector’s. The petroleum sector’s. The petroleum sector’s.

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Government Pension Fund – Global London, May 2008

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  1. Government Pension Fund – GlobalLondon, May 2008 Martin Skancke Director General Asset Management Department

  2. The petroleum sector in relation to the Norwegian economy 38 % 25 % 51 % 24 % The petroleum sector’s The petroleum sector’s The petroleum sector’s The petroleum sector’s share of GDP share of total investments share of total exports share of state revenues Source: Statistics Norway, Ministry of Finance

  3. The Fund mechanism – integrated with fiscal policy Revenues Return on fund investments Petroleum revenues Fund State Budget Transfer to finance non-oil budget deficit Expenditures Fiscal policy guideline(over time spend real return of the fund, estimated at4%)

  4. Norway’s fund: Function • The Norwegian fund USD 375bn and growing: a tool for • long-term wealth management • short and medium term stabilization • Integrated with fiscal budget • Invested only abroad • Transparency

  5. Founded on Act, regulations and separate contracts Pension Fund - Global Governance Structure Office of the Auditor General Norwegian Parliament Legislator • Pension Fund Act • Performance reports and strategic changes reported in National Budgets and National Accounts Principal Ministry of Finance • Advisory / consultancy agreement Norges Bank Audit • Regulations • Management agreement Advisors • Performance reports Central Bank (NBIM) Manager

  6. Norway’s fund: Key features • Aim: Maximize financial returns • Financial investor with non-strategic holdings. • Separation of roles between owner and operational manager • High degree of transparency • Ethical guidelines that are transparent and predictable, based on internationally recognized standards

  7. The value of SWFs • Free capital movements • Allow capital exporters to • decouple consumption and current revenues • improve risk/return ratio on savings • Allow capital importers to • decouple investments and domestic savings • improve productivity through productive investments • SWFs may contribute to increased stability in financial markets • Long time-horizon • No liabilities • Little or no need for liquidity in the short term

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