# How Norway manages its $2.25 trillion fund *Council on Foreign Relations* · https://www.youtube.com/watch?v=aIwCKucn7Co ## Summary In this short interview, Norway's Prime Minister explains how the country's $2.25 trillion sovereign wealth fund converts oil and gas revenues into a permanent financial asset for future generations. The government only spends up to 3% of the fund's annual returns, never the capital itself. Unlike strategic Gulf funds, it operates as a broad index fund holding small stakes in 7,000 to 8,000 companies worldwide, governed by ethical guidelines that are now under review. ## Key points - Norway's sovereign wealth fund has reached two and a quarter trillion dollars, roughly half a million dollars per Norwegian. - Oil and gas revenues flow into the fund rather than the government budget, insulating the budget from oil price swings. - The government spends only 3% or less of the fund's interest each year and has not spent any of the fund's capital. - The fund is designed to last forever and benefit future generations, particularly future pensions. - Unlike Gulf sovereign wealth funds, it takes no more than roughly 1 to 3% stakes in companies and holds shares in about 7,000 to 8,000 companies as an index fund. - The fund follows ethical guidelines, avoiding companies that violate basic international conventions, such as tobacco companies. - A review of the fund's ethical principles is underway so it reflects the values of the Norwegian people. - The Prime Minister notes it is harder to explain why you cannot spend money that you do have than money you don't have. ## Notes ### Purpose of the Fund - Norway's sovereign wealth fund has reached two and a quarter trillion dollars, serving about 5 million people — close to half a million dollars per person.\n- The current generation is transferring value from energy sales, mainly to Europe, into a fund that will fund future pensions in Norway. - Oil price fluctuations do not affect the government budget; revenues go directly into the fund. ### Spending Rules - The government can spend 3% or less of the fund's interest per year. - No money from the fund's capital itself has been spent — only part of the interest. - The fund is meant to be there forever, for future generations, if it is well protected. ### Investment Strategy - Unlike strategic sovereign wealth funds in the Gulf, Norway never takes more than roughly 1 to 3% shares in a company. - It is an index fund owning shares in about 7,000 to 8,000 companies around the world. ### Ethical Guidelines - The fund is supposed to invest in countries that respect basic international conventions. - It avoids companies that are heavily invested in coal and tobacco companies. - A review of these ethical principles is underway so the fund — owned by all Norwegians and future generations — lives up to the values of the Norwegian people. ### Political Challenge - The Prime Minister observes that explaining the government cannot use money it doesn't have is easy; it is harder to explain it cannot use money that it does have. ## Transcript [00:00] Prime Minister, you have a little fund in Norway, the sovereign fund. I looked at, I just checked, it's reached two... Two and a quarter trillion dollars. You have what, 5 million people in Norway? Like, I'm sure I've... close to half a million dollars per person. What are you going to do with it? Share with the fins. [00:25] What we are doing is we live in a generation where we are transferring value from energy that is being sold mainly to Europe into a fund that will fund pensions in the future in Norway. So this is, you know, when oil prices go up and down, nothing goes into my budget. It goes into this fund. And from that fund, we can spend 3% or less of interest. a year. So basically, we have not spent any money from that fund. only part of the interest and it's meant to be there for future generations. It basically is meant to be a fund there for ever. if it is well protected. And it is differing from sovereign wealth funds in the Gulf, for example, where they are strategic funds, which are being used by major shares, we never take more than [01:15] Basically, 1 to 2 or 3% shares of companies. It is owning... shares in about 7,000 to 8,000. Companies around the world is an index fund. But you do have some ethical guidelines, for example, relating to Israel-Gaza. You have it. I mean, we are not, the fund is supposed to invest in countries that respect, you know, basic international conventions. We have not investing in companies that are in a major way invested in code. tobacco companies and so on. And now we have a review of those principles so that a fund which is basically owned by all Norwegian and future generations live up to basically the values we have as a people. So it is a major responsibility to manage that over time. and to manage our economy in a way. You know, you can explain to people that the government cannot use money that you don't have. [02:11] I can tell you it's harder to explain that you cannot use money that you do have.