The purposes of the Pension Fund and the foreign reserves are similar; they are both essentially national savings funds, except for that part of the reserves that we may need for policy purposes. The current asset allocation is thus effectively the same for both funds. At present they have 40 per cent in equities and 60 per cent in fixed income. The investments are widely diversified across international markets. The investment strategy has so far aimed at low return volatility, perhaps to a larger extent than is reasonable for a fund that is meant to be permanent. The strategy is currently under review by the Ministry of Finance, and there may be changes under way. 6. The Ministry of Finance acts as owner of the Pension Fund, on behalf of the government. The management of the Pension Fund is delegated to Norges Bank. The key feature of the model is the  BIS Review 86/2006  1  division of responsibilities between the two institutions. The Ministry takes the high-level decisions and defines a clear mandate for Norges Bank. In accordance with that mandate Norges Bank makes all investment decisions without interference from the Ministry. The benchmark portfolio for the Fund is defined by the Ministry. The benchmark determines most of the asset allocation in the actual portfolio, but the Ministry also leaves some leeway for the manager. NBIM shall deviate from the benchmark in order to obtain a higher return. Active management has become a very important part of our investment operations.
Svein Gjedrem: Wealth management in a public setting Introductory statement by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), to panel discussion on “Problems of Plenty? Challenges and Opportunities from the Accumulation of Large Exchange Reserves and Windfall Revenue”, arranged as part of the seminar program of the 2006 Annual Meetings of the IMF and the World Bank, Singapore, 18 September 2006. Please note that the text below may differ slightly from the actual presentation. *  *  *  1. Thank you for this opportunity to discuss the challenges that arise when managing financial wealth in a public sector environment. Norges Bank now has eight to ten years of experience of this task, and I shall try to describe in brief the strategies adopted by Norges Bank, and what we believe we have learned. 2. We have a large amount of money under management. Our foreign reserves are probably larger than needed for financial stability and monetary policy operations. But the most important fund is the Government Pension Fund, formerly the Petroleum Fund. We have been responsible for managing that Fund since its inception in 1996, and it has been a major task for us since 1998. 3. The value of the petroleum resources in the North Sea is currently estimated at about USD 700 billion. The government receives the bulk of the revenues generated from petroleum extraction as sales revenues and taxes. The government channels these revenues into the Pension Fund as financial assets.