Table 3 The credit cycle and subsequent crises  Total peaks 1880–2008*  Crisis years** within 5 years following a peak  % peaks with crisis years within the following 5 years  Banking crisis within 5 years following a peak  % peaks with Banking crisis within the following 5 years  AUS  9  6  66.7%  2  22.2%  CAN  11  6  54.5%  2  18.2%  DEU  9  2  22.2%  1  11.1%  DNK  10  4  40.0%  3  30.0%  ESP  8  5  62.5%  2  25.0%  FRA  5  3  60.0%  1  20.0%  GBR  9  7  77.8%  3  33.3%  ITA  11  8  72.7%  6  54.5%  NLD  8  1  12.5%  1  12.5%  NOR  13  5  38.5%  2  15.4%  SWE  10  4  40.0%  2  20.0%  USA  9  6  66.7%  5  55.6%  112  57  50.9%  30  26.8%  * Interwar data missing for most countries. Data coverage incomplete for other countries e.g. only post-1945 data available for France. ** Defined as years in which either a banking crisis or a currency crisis or both (“twin crisis”) occur. Source: Bordo et. al. (2001) and Bank calculations.
The return generated by Norges Bank’s investment management in 2008 was 3.4 per cent lower than the benchmark portfolio used as performance measure. This is considerably weaker than might have been expected in light of our investment strategy, which relies on a large number of small, independent positions. In the period since 1998, the Fund has recorded a cumulative annual excess return of 0.04 percentage point lower than the return on the benchmark portfolio defined by the Ministry of Finance. Norges Bank’s aim is to generate added value through our investment choices. After many years of high performance, the Fund is now right back where it started. The Fund’s underperformance and the fall in overall return can largely be attributed to the financial crisis. Assessment of the results of our active choices should, in our opinion, also take into account the long-term perspective on which the Fund’s investment strategy is based. Norges Bank’s investment results since 1998 are different for the two asset classes equities and fixed income instruments. Although active equity management generated negative results in 2008, these were well within the limits predicted by our risk models for any one year. However, since the beginning the annual excess return on equities has been close to ½ percentage point. We have established an equity management strategy that seems to be fairly robust to market fluctuations and that has, as we have seen, generated solid returns viewed over a longer period. Developments in the Fund’s fixed income portfolio have followed a different path.