The crisis nevertheless revealed that the exposure to underlying systematic risk was greater than we perhaps realised at the outset. In the hearing before the Storting (Norwegian parliament) in 2009, directly after the reporting of substantial losses in 2008, I indicated that unless the economic outlook went from bad to considerably worse, active management would deliver substantial excess returns in the coming years. Even though there was probably an underlying fear of a collapse in the financial system, it was fairly clear that the main factor behind the decline was limited market liquidity. Since the second quarter of last year, book values have increased even faster than we dared to hope. Returns have also been good as a result of a restructuring of the portfolio. The Fund continued to pursue active management through the crisis. It has proven important that active management could be pursued. Active management has on the whole delivered good results, contributing an average 0.3 percentage point to the overall annual return. All in all, active management has increased the value of the Fund by several tens of billions of Norwegian kroner. Chart: Key components of the design of the Fund’s investment strategy The Ministry of Finance sets out the investment strategy for the Fund, while Norges Bank as manager provides advice on a regular basis. This past summer, we proposed several important changes to the Fund’s investment strategy 14 . The proposal illustrates the relationship between the various components of the strategy.
Productivity growth and labour force participation have been satisfactory over the past decade while relative labour costs and prices have reached yet higher levels. It remains to be seen whether the real krone exchange rate will gradually fall back when increases in petroleum revenue spending can no longer be sustained and the relative size of the oil supply industry decreases. Thank you for your attention! BIS Review 145/2010  9  10  BIS Review 145/2010  BIS Review 145/2010  11  12  BIS Review 145/2010  BIS Review 145/2010  13  14  BIS Review 145/2010