Bonus payments made this year to external managers of Norway’s huge so-called “oil fund” may be triple the amount initially estimated in 2012. The fund, formally known as The Norwegian Pension Fund – Global, is one of the world’s largest sovereign wealth funds.
The oil fund was established in 1990 as a fiscal policy tool to support long-term management of Norway’s petroleum revenue. It is managed by Norges Bank Investment Management (NBIM), ranks as one of the world’s biggest investors and is currently worth around NOK 3.8 trillion (USD 700bn).
Payment for external managers is the largest single cost in the oil fund’s budget. The fund’s plan is to favor investments in emerging markets and small- and medium-size companies. It hires local experts to help out with this work, which again means higher management fees.
Newspaper Dagens Næringsliv (DN) reported Wednesday that the central bank, which is responsible for NBIM, is expecting to pay around NOK 300 million (USD 54m) in fixed fees and about NOK 500 million in performance-based fees in 2013. That may triple fees from the 2012 estimate, which was around NOK 150 million. The fund paid a total of around NOK 900 million to external managers in 2011, which resulted in some public criticism of the large amount.
“There are large uncertainties related to the performance-based fees in the budget. The 2013 budget is based on an expected level over time,” central bank boss Øystein Olsen and NBIM deputy chief Trond Grande wrote, according to DN.
Management of the oil fund is expected to cost a total of NOK 2.7 billion or 2013, up from NOK 2.5 billion in the 2012 budget. The fund plans to increase its staff by 40 people to 376 employees by the end of this year. Salary costs are therefore expected to grow by 23 percent.
The Norwegian Ministry of Finance forecasts that the fund will reach NOK 4.3 trillion by the end of 2014 and NOK 6 trillion by the end of 2019.
Views and News from Norway/Aasa Christine Stoltz
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