Norway Pension Fund Global

Series: Yale School of Management
Format: Raw, online case
Topics: Finance, Accounting, Economics, Organizational Behavior, Public Policy, Corporate Governance, Global Business, Economic Development, Energy, Investing
Initial date of publication: April 2010
Geographic setting of case: Norway
Access:  Available to educational institutions by emailing

Overview: When international markets collapsed in 2008, the investments of the Pension Fund Global, Norway's sovereign wealth fund set up to manage the country's oil revenues, dropped by nearly 25 percent as measured in international currency. The loss occasioned some concern in the small Scandinavian country of about 4.6 million inhabitants.

Since its inception in 1990, the Fund had become the second largest sovereign wealth fund in the world, valued at $440 billion, nearly $100,000 per citizen of Norway. The Fund’s holdings were equivalent to nearly 0.75% of the equity on all the world’s stock exchanges. Overseen by Norway’s Ministry of Finance, the Fund was run on a daily basis by NBIM (Norges Bank Investment Management), an arm of the country’s national bank.

The Fund’s existence and growth were testament to Norway’s long-term view of its petroleum revenues. The country’s political leadership had decided to set aside the money that flowed from Norway’s North Sea oil fields with the plan to withdraw only expected earnings, leaving the capital intact to benefit future generations. The political establishment also insisted that the fund be run in a highly transparent manner. The Fund operated under far more stringent investment guidelines and reporting requirements than any other sovereign wealth fund.

The 2008 losses in the Fund's investments heightened awareness about its role and raised questions about the Fund’s strategy, management, and ethical investment guidelines. In particular, Norwegians wondered:

  1. What was the appropriate investment strategy for the Fund? Was the Fund's stated strategy of active investment appropriate? Or should the Fund focus on passive, indexed investment?
  2. How should the fund execute this strategy? Should it develop the investing expertise in-house or should it outsource it? Does it have (or could it hire) the kinds of employees that it needs?"
  3. What role should ethical investment considerations play? Were investment decisions made on criteria other than expected returns limiting the fund’s ability to earn appropriately, either through choice of investment vehicles or expenditures required to participate in shareholder issues?

In the face of these questions, the Ministry of Finance called for examination of “the status of risk management and the experiences in active management in Norges Bank.” To ground its inquiry, the ministry required additional reporting from Norges Bank, commissioned reports from external consultants, and set up a conference in January 2010 to discuss the various findings. If changes were needed, the Ministry was planning to present recommendations to the country’s legislature, the Storting, by spring 2010.