In the National Budget for 2004, the Ministry of Finance considers a number of questions connected with the Petroleum Fund's investment strategy, on the basis of input from Norges Bank and the consulting company Mercer Investment Consulting.
In particular, the Ministry has evaluated the inclusion of potential new investment alternatives in the Petroleum Fund's benchmark. These alternatives are private equity, real estate, inflation-linked bonds and small cap equities. In the National Budget, the Ministry points out the need to continue working with alternatives, in particular inflation-linked bonds, that contribute to safeguarding the Petroleum Fund's real value. The Ministry does not endorse the other new investment alternatives which are discussed.
The Ministry of Finance follows Norges Bank's recommendation of including a number of new emerging equity and fixed income markets in the Petroleum Fund's investment universe. South Africa will now be included in equity benchmark. Otherwise, the benchmark is unaffected by the expansion of the investment universe.
A special strategy report from Norges Bank to the Ministry of Finance concludes that the substantial market fluctuations in recent years are within the range of potential outcomes that was outlined when the Fund's investment strategy was adopted. Therefore, Norges Bank does not see the need to reconsider the Petroleum Fund's strategic choices.
The section of the National Budget for 2004 where the Ministry of Finance discusses the Petroleum Fund's investment strategy and the reports from Norges Bank and Mercer are available on the Ministry's website.
Norges Bank's submissions:
Strategic allocation in the Petroleum Fund: an analysis of the basis for decisions. August 2003
Expansion of the benchmark index for the Government Petroleum Fund's equity investmentsNew evaluation of emerging equity and bond markets