Norway’s Sovereign Wealth Fund

Feb 7, 2025 8 min read

Florian

“Many Swiss companies are doing well.”

– Nicolai Tangen, CEO of Norges Bank Investment Management

arvy’s teaser: Norway turned oil riches into the world’s largest sovereign wealth fund, now worth $1.8 trillion. With stakes in 9,000 companies, it’s reshaping global finance – proving that disciplined investing and long-term vision create unstoppable wealth. And you can replicate it!

Sovereign Wealth Fund.

This is a state-owned investment fund that invests in stocks, bonds, real estate, precious metals or private equity.

Sovereign wealth funds are primarily financed by countries that are rich in natural resources such as oil or that have large foreign exchange reserves from trade surpluses (more exports than imports), such as China. These funds, such as the China Investment Corporation and the Abu Dhabi Investment Authority, manage a country’s surplus assets to ensure long-term stability, financial security and sustainable returns. Their aim is to diversify income sources – as most are heavily dependent on oil – and support national development for current and future generations. Even President Trump is now ordering the creation of a US Sovereign Wealth Fund.

The largest Sovereign Wealth Fund in the world is owned by the Land of the Midnight Sun.

It belongs to Norway.

Chart 1: The World’s Largest Sovereign Wealth Funds (Sep 2024)

Source: Sovereign Wealth Fund Institute, Chronograph

Government Pension Fund Global – the Oil Fund

The official name of the fund is Government Pension Fund Global. In short, it is the Oil Fund.

Its origin goes back to the discovery of oil in the 1950s and 60s, when Norway evolved from a small fishing nation into one of the world’s largest oil and gas producers.

In 1969, one of the world’s major offshore oil fields was discovered off Norway- Ekofisk. Suddenly there was a lot of oil to sell, and the country’s economy grew dramatically.

The country immediately became rich. And fortunately for them, they knew what to do with all the money.

It was decided early on that revenues from the oil and gas sector should be used wisely to avoid economic imbalances. After all, oil revenues are important for Norway, but one day the oil will eventually run out. This is why the Oil Fund was established in the 1990s. The purpose of the fund is to ensure that the money is used responsibly and for the long term, thus securing the future of the Norwegian economy.

The first money was paid into the fund in 1996.

They started with a lump sum of $150 million.

The success of the oil fund has been studied worldwide as it is a prime example of compound interest and Dollar-Cost-Averaging. Over the last three decades, it has grown to $1.8 trillion (as of 2024). Just last week they reported a record profit of $222 billion for the year 2024.

How was this achieved?

They simply stuck to the investment plan they had set out from the beginning. They contributed a portion of their oil and gas profits each year (Dollar-Cost-Averaging) and invested it in the global financial market. Over the years, the contributions and subsequent investment returns (chart 2) have compounded at an average rate of 6% per year.

What they did is as simple as it sounds, and you can easily replicate it: Start with a lump sum, do dollar-cost-averaging and let your wealth compound over time.

What started as a small initial investment has grown into a significant fortune for each individual Norwegian and the country itself.

This raises an obvious first question.

How is the money invested?

Chart 2: Norway’s growing oil empire

Source: Quartr

Norges Bank Investment Management

Investments are spread across most markets, countries and currencies in order to achieve broad exposure to global growth and value creation while ensuring good risk diversification. The fund only invests abroad to ensure that the Norwegian economy does not overheat.

The Oil Fund has been managed by a dedicated asset management team at Norges Bank since 1998.

In the 1990s, only 40% was initially invested in equities, which increased to 60% over the years until the Global Financial Crisis (GFC, 2008).

As interest rates continued to fall in the period following the GFC and remained low for an extended period, an even greater proportion was invested in equities with the aim of achieving higher long-term returns.

Today, the assets are divided between equities (71.4 %), bonds (26.6 %), real estate (1.8 %) and renewable energies (0.1 %).

With such a high equity allocation and such a large investment volume, the fund has holdings in around 9,000 companies from most countries and sectors. On average, the fund holds 1.5% of all listed companies. This makes the fund the largest single investor in the world. They are also invested in many Swiss equities – the largest Swiss holding is UBS.

In addition, the fund’s market value per Norwegian citizen is now over NOK 3 million (CHF 240k), compared to NOK 39,000 (CHF 3’120) 26 years ago (chart 3).

Wow!

The fund has become increasingly important for Norway in recent years. It must be a great burden to take on this task and manage such a fortune, doesn’t it?

This raises a second obvious question.

Who makes the decisions here?

Chart 3: Norway’s Sovereign Wealth Fund – Market Value per citizen

Source: Quartr

Nicolai Tangen & Podcast “In Good Company”

It is Nicolai Tangen, who has been CEO of Norges Bank Investment Management since 2020. A former hedge fund manager who sold his company and left to pursue an even bigger “Raison d’Être”.

Tangen is also the host of the podcast “In Good Company”, where he interviews leaders of the biggest companies in the world.

Notable guests include:

Bob Iger, CEO of Walt Disney
Benedetto Vigna, CEO of Ferrari
Sam Altman, former CEO of OpenAI
Jensen Huang, Founder and CEO of Nvidia
Magnus Carlsen, chess grandmaster (chart 4)

The podcast offers insights into the strategies, leadership principles and other facets of these leaders and their companies.

You might be wondering how on earth he manages to invite all these CEOs, founders and well-known personalities to his podcast? As you now know, Norges Bank Investment Management is reputed to be the largest single investor in the world, so he literally just calls them.

His goal?

Tangen wants to create transparency about how the fund is invested by taking a closer look at the companies it invests in.

I can highly recommend them!

Chart 4: Nicolai Tangen’s “In Good Company” Podcast with chess grandmaster Magnus Carlsen