Achieving Investment Excellence

Case Study – GPFG

BUILDING A LONG-TERM, RESPONSIBLE FUND ON SOLID ACADEMIC AND EVIDENCE-BASED PRINCIPLES

Background

The Government Pension Fund Global (GPFG) is commonly known as Norges.¹ It is managed by Norges Bank Investment Management² and funded from the revenues of the Norwegian oil fields. The investment policy of the fund is designed by the Norwegian Ministry of Finance and approved by parliament. In February 2017, the fund has an approximate value of $900 billion (NOK 7.379 billion). Due to the fund's size, it has on average a 1.3% ownership of all listed companies outside of Europe and 2.3% ownership of all listed companies in Europe. The primary goal of the oil fund is to save for future generations in Norway: “One day the oil will run out, but the return on the fund will continue to benefit the Norwegian population.”

GPFG is highly prudent and transparent in sharing the research that underpins its strategy. Ang et al. (2014)³ found that 99% of the fund's return was the result of policy-driven decisions; furthermore all policy changes and investments can be found on GPFG's website. GPFG has realized an annualized rate of return of 5.6% since 1998. After correction for inflation and management fees, the annualized real return was 3.7%.⁴ GPFG thoroughly considers the long term and how investment decisions will work out in the future. In general, GPFG applies a passive investment strategy. In the light of low expected return environment, the equity allocation has been ...