Norway's Sovereign Wealth Fund: Creating a Lasting Prosperity

1 minutes reading time
Published 24 Nov 2023
Reviewed by: Peter Westberg
Updated 6 Feb 2024

Oil, while essential, doesn’t always guarantee wealth for countries possessing it. Nations might rapidly gain wealth upon discovering oil, but it can lead to “The Dutch Disease” or “The Oil Curse,” where other industries suffer and corruption and inequality rise.

However, this isn’t universal. Norway, the world’s second richest country if you exclude micronations, exemplifies a success story. Its prosperity, measured across various metrics, is partly due to its wise management of oil revenues through the Norwegian Government Pension Fund and Norges Bank Investment Management, one of the world’s largest, yet lesser-known, asset managers.

Let’s take a closer look.

Striking Oil

The origins of the fund can be traced back to the discovery and management of Norway’s oil and gas resources. Discovering oil transformed the country from a small fishing nation into the world’s 8th largest oil producer and 3rd largest producer of natural gas. This transformation began in the late 1950s and early 1960s, a period when few believed that the Norwegian Continental Shelf (NCS) held significant oil and gas reserves. The game changed in 1959 with the discovery of the Groningen gas field in the Netherlands, sparking interest in the North Sea’s potential​​​​.

In 1963, the Norwegian government asserted sovereignty over the Norwegian continental shelf, ensuring control over its natural resources. The first drilling licenses were awarded in 1965, and despite initial setbacks with dry wells, the discovery of the Ekofisk oil field in 1969 marked the beginning of Norway’s oil era. Ekofisk, discovered by Phillips Petroleum Company (today ConocoPhillips), was at the time one of the largest offshore oil fields ever discovered, and its production began in 1971​​​​.

Oil Rig

Managing this newfound oil wealth was a crucial concern for the Norwegian Government. In 1972, the state-owned oil company Statoil (now Equinor) was established, and the principle that 50% of each oil license should be state-owned was introduced. This was crucial in ensuring that the benefits of oil and gas activities were retained within Norway. Over the years, Statoil underwent several changes, including privatization and mergers, but the Norwegian state retained a significant ownership stake of the resources.

But what did they do with all the oil revenues?

Creating the Fund

The creation of Norway’s oil fund, now known as the Government Pension Fund Global, was a pivotal decision in managing the nation’s oil wealth. The fund’s inception can be traced back to the recommendations of the Tempo Committee, led by former governor of the Central Bank of Norway, Hermod Skånland. In 1983, the committee submitted a report proposing the establishment of a Sovereign Wealth Fund (SWF), to store the surge in oil revenue. Suggesting that only the real return should be spent​​.


The committee further suggested investing the fund in international markets, a strategy intended to prevent the overheating of Norway’s economy, and diversify risk. Despite some initial reservations about the state’s commitment to maintaining a long-term savings fund instead of spending the oil revenues, the proposal was gradually accepted and integrated into the political agenda. The idea of the fund continued to develop and mature throughout the 1980s​​.

Eventually, Norway’s Parliament passed the law in 1990 establishing the Government Petroleum Fund. The main objective of the fund was to support the government’s long-term management of petroleum revenue. It was designed to provide fiscal flexibility in the event of declining oil prices or a contracting mainland economy. Additionally, it aimed to address the financial challenges associated with an aging population and anticipated reductions in petroleum revenue. The fund has been a key instrument for Norway to stabilize oil consumption patterns and manage the economic implications of the oil sector’s volatility​​.

In 2006, the fund was renamed the Government Pension Fund Global (GPFG). It was not set up as a separate entity but was instead established as a deposit account at the Central Bank of Norway, Norges Bank, where the government could deposit its petroleum revenues through regular transfers.

The first capital transfer from the Ministry of Finance in 1996
The first capital transfer from the Ministry of Finance in 1996

The Ministry of Finance, acting on behalf of the Norwegian Parliament and the people of Norway, became the official owner of the GPFG. They’re responsible for determining the investment strategy and ethical guidelines of the fund and overseeing its operational management, which is delegated to Norges Bank. However, any significant changes to the investment strategy require the approval of the Storting, Norway’s parliament. The GPFG has since 1998 been managed by Norges Bank’s dedicated asset management team, which invests in fixed-income and equity markets, and since 2011, in real-estate as well.

Norges Bank Investment Management

As stated above Norges Bank Investment Management (NBIM) is the division of the Central Bank of Norway responsible for managing the Norwegian Government Pension Fund Global, often referred to as the Oil Fund. NBIM plays a crucial role in managing Norway’s foreign exchange reserves and the Government Pension Fund Global. In fact, it’s the largest sovereign wealth fund in the world​​.

Data Center

NBIM itself is a global entity, employing almost 600 people in 35 countries, with offices in Oslo, London, New York, and Singapore. Since taking over the management of the fund in 1998, NBIM has managed to generate an average annual return of 5.99%. Throughout its history, they have continuously expanded and diversified in terms of investment types and geographical spread. Significant milestones include the first real estate investments in London, the U.S., and Asia, the first investment in unlisted renewable energy infrastructure, and the growth in value to 10,000 billion NOK, or over 1 trillion dollars, by 2019​​​​​​​​.

NBIM Returns and Inflows
NBIM Returns and Inflows

As of November 2023, the fund’s assets were valued at more than 15,000 billion NOK, or approximately 1.4 trillion dollars​​. It owns almost 1.5 percent of all shares in the world’s listed companies, with holdings in around 9,000 companies globally. It also owns hundreds of buildings in major cities worldwide and an offshore wind farm, and receives additional income from lending to countries and companies​​. The extensive equities portfolio include stakes in companies such as Apple, Nestlé, Microsoft, and Samsung.

You’ve probably heard about its manager.

Nicolai Tangen

Nicolai Tangen, born on August 10, 1966, is the Chief Executive Officer of NBIM since September 2020. His career prior to joining NBIM is marked by significant achievements and contributions in various fields.

Tangen has a diverse educational background, and was initially trained in interrogation and translation with the Norwegian Intelligence Service. He then pursued higher education at the Norwegian School of Economics and the Wharton School of the University of Pennsylvania, where he completed his undergraduate studies between 1988 and 1992. Further enhancing his academic portfolio, Tangen holds master’s degrees in art history from the Courtauld Institute of Art, London, and in social psychology from the London School of Economics.

Prior to his current role, Tangen had a successful career in the investment sector. He began as an analyst at Cazenove & Co. before moving to Egerton Capital in 1997. In 2005, he founded AKO Capital, a London-based hedge fund, which under his leadership managed assets worth £10.8 billion, or approximately $13 billion​. His expertise in investment management and his accomplishments with AKO Capital played a significant role in his appointment as the CEO of NBIM, his current position.

Interestingly, him becoming the CEO of NBIM was marked by some controversy, primarily concerning potential conflicts of interest. To address these concerns and comply with the Norwegian parliament’s finance committee’s instructions, Tangen sold his stake in AKO Capital and transferred the values and ownership to the AKO Foundation. He also moved his personal fortune to a Norwegian bank account, demonstrating his commitment to his role at NBIM and resolving potential conflicts of interest​​.

Tangen also hosts the podcast “In Good Company,” where he interviews leaders of some of the world’s largest companies. Notable guests include Sam Altman, former CEO of OpenAI; Jensen Huang, Founder and CEO of Nvidia; And Benedetto Vigna, CEO of Ferrari. The podcast offers insights into the strategies, leadership principles, and other facets of these leaders and their companies. As Norges Bank Investment Management is noted as the largest single investor in the world, Tangen aims to provide transparency about how the fund is invested by delving deeper into the companies it’s invested in.

Wrapping Up

Norway’s approach to managing its oil wealth is a notable example of effective long-term economic planning. Through the establishment and careful management of the Government Pension Fund Global, Norway has not only safeguarded its economy against the volatility of oil prices but also ensured a stable and prosperous future for its citizens. Nicolai Tangen’s leadership at NBIM reflects a commitment to maintaining this legacy, as he steers the fund through global markets while upholding ethical investment practices. Norway’s strategy with the GPFG provides an insightful example for other resource-rich countries on balancing immediate economic benefits with long-term economic health and stability.

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