Management of the Petroleum Fund The Petroleum Fund is currently one of the world’s largest institutional investors, on a par with the largest pension fund in the US and the largest European fund. With the rate of growth that can be expected, the Petroleum Fund will be larger than these two funds in the next year or two. Norges Bank manages the Petroleum Fund on behalf of the Ministry of Finance. This is a challenging task that has been given high priority within the Bank. We have established what we believe is a professional management organisation. Performance is measured against the benchmark portfolio defined by the Ministry of Finance and the results are published in a quarterly report. So far, Norges Bank has achieved an excess return every year. Management costs have been low. In terms of net earnings, Norges Bank has added close to NOK 15bn to the Fund. The total return for the Fund is largely determined by the benchmark portfolio. Since 1997, the real return has averaged 4.2 per cent. Of this, 0.4 percentage point can be attributed to active management, for which Norges Bank is responsible. The Fund has become a large investor in international equity markets. Norges Bank recently established a group dedicated to actively supporting best practice corporate governance in companies where the Fund has ownership interests. Norges Bank already makes extensive use of its voting rights and has voted in about 17 000 cases this year.
I had the privilege of hearing General Michael Hayden, former head of the NSA and CIA, address a payments symposium hosted by the Federal Reserve Bank of Chicago a few years ago. In that venue, General Hayden spoke of the tectonic shifts affecting the global landscape, and their prospective impact on cyber, terror, and geopolitical threats. His basic message, in two parts: keep your seat belts on, it promises to be a volatile century (yes, century); and when it comes to our critical financial market infrastructure being subject to attack, it is not a matter of “if” but “when". Responding to the current threat environment represents the challenge of our generation; these are days of preparation. I will posit that a fundamental distinction exists between cyber resiliency and traditional resiliency: what works for us in conventional resiliency scenarios, namely the automatic and instantaneous replication of data, works against us in cyber scenarios, reflecting risks that a pernicious malware, or a severe data corruption, or even an application failure propagates itself across primary, secondary, and tertiary operating sites, rendering a systemic infrastructure functionally inoperable. In other venues we have therefore elaborated upon the need for a new paradigm for resiliency, one that endeavors to mate traditional precepts of geographic dispersion of infrastructure and human capital with new realities compelling technological diversity, and a platform for recovery, should the core of a financial market infrastructure become corrupted.