Sea of money: Norway's $1.4 trillion wealth fund

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Norway's conclusion to the question in the introduction of today's newsletter — to funnel some of this rush of oil revenue into a sovereign wealth fund — has little competition on the list of “best financial decisions of all time”, as the fund’s assets have ballooned to over $1.4 trillion. That puts Norway's sovereign fund at a similar size to that of China's — yes, the same China that has more than 260x as many people as Norway has.

A sea of money

In 1963, Norway’s government declared sovereignty over the Norwegian Continental Shelf — an area of the world that, until the late 1950s, most states had overlooked as a potentially rich source of oil.

When drilling started just a few years later, Norway found itself awash with black gold and the government immediately began debating how to ensure fiscal flexibility should petroleum prices falter, its economy crumble, or oil supplies eventually run dry.

To guarantee that its current and future citizens would benefit from this new-found wealth, the state wanted to use the money to invest in the long-term while making sure it could be drawn on “when required” — thus establishing the Government Petroleum Fund in 1990. In 1996, the first cash was transferred into the Petroleum Fund — or the Government Pension Fund of Norway, as it later became known.

Golden gås

By the end of 1998, the pot had amassed just shy of 172 billion kroner, or $23 billion. However, since then, the fund has grown exponentially as the oil money was poured into a smörgåsbord of investments, from real estate and government bonds to equity investments in thousands of companies.

Returns on those wide-ranging investments — which now make up the bulk of the fund, with less than a third of the total coming from government inflows — have seen the fund's value rise to world-influencing levels, with $1.02 trillion tied up in global equity investments.

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