Norway’s huge sovereign wealth fund known as the Oil Fund surpassed a market value of a trillion US dollars this week, at around 2am on Tuesday September 19 to be exact. It was the first time the fund hit the record level, and its chief executive allowed himself to be impressed.
“I don’t think anyone expected the fund to ever reach 1 trillion dollars when the first transfer of oil revenue was made in May 1996,” said Yngve Slyngstad, CEO of Norges Bank Investment Management, which runs the fund for Norway’s central bank.
“Reaching a trillion dollars is a milestone, and the growth in the fund’s market value has been stunning,” Slyngstad added. The growth was attributed to stronger currencies against the US dollar and “positive development” in the stock market.
Political debate continues in Norway over how much money from the fund can or should be tapped each year to augment the state budget. Conservative Prime Minister Erna Solberg and Finance Minister Siv Jensen have been criticized for using “record amounts of oil money” in recent years, to offset an economic downturn caused by the dive in oil prices, but they have never tapped more than the 4 percent limit widely agreed to be available for spending, since that’s considered to be the average rate of return on the fund itself.
Earlier this year Jensen and Solberg also proposed reducing that formula to 3 percent, largely because the fund was getting so big. As Jensen once observed, the oil fund is the “equivalent of Norway’s piggy bank (meant to fund pensions for future generations), but the piggy is getting fatter every year.”