Embarrassment of riches: Norway ponders what to do with its $1T sovereign wealth fund

Oslo - It has been managed for nearly two decades with a focus on avoiding risk, conflicts of interest

Jobs, taxes and schools will be top of Norwegian voters' minds when they go to the polls on September 11, but it's what to do about the nearly $1-trillion sovereign wealth fund that may be the next parliament's biggest challenge.
The world's largest sovereign wealth fund, pooling Norway's revenues from oil and gas production, has been managed for nearly two decades with a focus on avoiding risk and conflicts of interest.
With prices of crude oil down by more than half in the past three years and returns below target, policymakers and critics agree the fund is due for an overhaul. For Norway, the difficulty is building a political consensus around what it should look like.
"It is more an academic topic than a bread-and-butter issue for voters but... the coming months are absolutely crucial," said Torstein Tvedt Solberg, an opposition Labour Party parliamentary candidate and its spokesman on the fund.
"There are some big decisions ahead about the way it [the fund] is managed that are coming up," he told Reuters.
Norway's SWF has returned 3.79 per cent per year on average since it opened in 1998. With the pot always growing - now at two-and-a-half times GDP - the fact that that's short of the target four per cent hasn't been a big problem.
Last year, however, the government had to make its first net withdrawal to supplement a state budget hit by the fall in oil prices and lower state revenues from oil and gas production, which accounted for half of Norway's total exports in 2016. More net withdrawals are expected in the years ahead, economists say.
Norway's returns compare to 6.1 per cent over the past 20 years at the world's second-largest wealth fund, the Abu Dhabi Investment Authority, and 4.76 per cent at the third-largest, China Investment Corporation, since it began in 2007. Unlike those funds, Oslo's SWF is managed by a unit of the central bank that must turn to the government to secure a majority in parliament to make strategic changes, no easy feat given that minority governments are common in Norway.
"What differentiates this fund from others is that it is democratically owned," said Marianne Marthinsen, the Labour Party's finance spokeswoman.
"The fund must have legitimacy with the Norwegian people, and parliament must have democratic controls," she said. Critics say the process of consensus-building among so many disparate interest groups is agonisingly slow and possibly even fiscally irresponsible, however.