Few days ago Norges Bank (Norwegian central bank) has published it’s quarterly investment report for Q3’2008. Norges manages oil money (2.1 trillion NOK) that is stored away in a Government Pension Fund. Results are very negative, not only returns for the past 3/12 months are  negative (no surprise, everyone that had exposure to equities is negative these days) but also excess return is negative and large, meaning that losses are much bigger than the global benchmark used as a reference. In the Q3’2008 active management took away almost two percent of managed assets.

Why being a Pole am I writing about the Norway pension fund results? I am not concerned about what pension the average Norway’s citizen will get in 20 years, but about the implications of the political debate that might follow. Norway’s pension fund has served as a role model for many SWFs around the world, so if there is a backlash, or a massive change in the strategic asset allocation, or in active risk budget it may have large implications for other SWFs. Norwegians had bad luck, they decided to go into equities shortly before the internet bubble burst. They decided to increase exposure to equities from 40% to 60% shortly before the current crisis hit the markets. Before they decided to sit tight and continue with their SAA, we shall see what happends this time around and whether they keep the same active risk budget of 1.5%.