Governance structure and management model Now, let me turn to the Fund management model. The governance structure is based on a clear division of responsibilities between the political authorities and the operational management. •  The Ministry of Finance is the owner of the Fund. The Ministry defines the mandate and monitors and evaluates performance. •  The management of the Fund is delegated to Norges Bank. The Bank’s task is to implement the investment strategy and exercise ownership rights. Norges Bank also provides professional advice to the Ministry on investment strategies. The Fund’s investment strategy is to maximise financial return with moderate risk. The longterm strategic allocation is defined in terms of a benchmark portfolio, which consists of equities and fixed income instruments. Equities account for 60 per cent of the Fund's strategic benchmark portfolio. The size of the Fund implies that it currently owns about 1 per cent of listed European equities and ½ per cent of listed equities on a global basis. Fixed income instruments account for 40 per cent. 2  BIS Review 81/2008  Furthermore, the Ministry has recently decided that the Fund should prepare the ground for investing in real estate at 5 per cent of the strategic benchmark portfolio. In time, this will reduce the fixed income share to 35 per cent. Norges Bank has built an organisation with emphasis on investment returns and based on three fundamental principles: Accountability, transparency and professional standards.
In 2006, the name was changed to the Government Pension Fund – Global. In spite of the name change, the Fund is more similar to an endowment than to a pension fund. Since the first transfer of some USD 400 million was made in 1996, the Fund has grown rapidly in size. Its assets are currently valued at around USD 400 billion. One third of the portfolio, about USD 130 billion is invested here in North America. The Fund is expected to grow rapidly in coming years, and may double in 5-10 years. The Fund was established as a tool to support prudent management of Norway’s petroleum wealth. One purpose is to shield the non-oil economy from price fluctuations (see Chart 3). The Fund is also a long-term savings instrument. It will help to cope with future financial commitments linked to an ageing population. Accumulation of capital in the Fund reflects the depletion of a non-renewable resource, which is exchanged for financial assets through the Fund’s investments. By setting up the Fund, it became possible to establish a path for production of oil and gas that is independent of the profile for petroleum revenue spending. Furthermore, to effectively shield the non-oil economy, and to make sure that private sector investment decisions could be made independently of the public sector’s saving of petroleum wealth, the Fund is only invested abroad. This also enhances the expected return on government wealth and reduces the risk.