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Petroleum Fund closing in on CalPERS

NORWAY – The Petroleum Fund has grown to just over NOK1trn (€124bn) and says it is now about the same size as the California Public Employees’ Retirement System in the US.

The fund said its market value rose after a return on investments of 8.9% in 2004 – beating the benchmark by 0.53 points. “Total return for the last two years has been 22.6%, primarily reflecting high returns in equity markets,” it added.

The plan’s value increased by NOK171bn during the year. Of that NOK138bn came from new capital from the Ministry of Finance.

“The Petroleum Fund has become large, even compared with the largest funds internationally,” the fund said in its annual report.

“In 2004, the largest European Fund (ABP in the Netherlands) was still larger than the Petroleum Fund, while the largest fund in the US (CalPERS in California) was about the same size.”

The report said that Norges Bank Investment Management, the wing of the central bank which runs the fund, will focus on core activities and consider outsourcing.

“Management resources will be focused on core activities and outsourcing will be considered in connection with all other activities,” it said.

For the period 1997 to 2004, the average annual real return on the Petroleum Fund was 4.0% after deducting management costs.

It said that the average annual excess return since equities joined the portfolio in 1998 has been 0.45% - and that that the total excess return has been just over NOK14bn.

The Environmental Fund was discontinued on December 1 last year and its assets transferred to the ordinary equity portfolio.

NBIM said its highest paid employee earned NOK4.8m in 2004 – more than twice that earned by NBIM executive director Knut Kjaer.

Its aims over the next few years include outperformance and active management.

It said: “The main objectives for the period 2005-07 are to achieve an annual net excess return of at least 0.25 percentage point by means of active management and to maintain a high level of confidence among customers and the general public.

“Active management will be further developed and exercised o the basis of Norges Bank Investment Management’s investment philosophy.”

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