The board must also be conscious that it is the owner’s representative – its loyalty must lie with the principal. If this emphasis is misplaced, it can damage the position of the fund in the public consciousness. Finally, I would like to underscore the importance of preserving cost-effective investment management. In the course of 20 years, Norges Bank has built up a competent investment management organisation. Considerable economies of scale have been realised – investment management costs are low. The level of management costs over time is particularly important for the owner’s net return. We must keep the GPFG’s management costs at a low level, regardless of whether the fund remains within the Bank or is organised outside the Bank. Norges Bank concurs with Central Bank Law Commission in that neither the fund nor its management tasks should be divided among several entities. This will raise management costs. Any gains, however, would be difficult to come by. Conclusion Norway has managed its petroleum resources well. We have set aside wealth for the future and have created a stable institutional framework for the management of the country’s savings. In the 6/7  BIS central bankers' speeches  quotation I began with, the Prime Minister points out that Norway has also been somewhat lucky. Oil and gas prices were high during a period where production was also substantial. Luck is hardly a permanent condition. Oil prices are now far below the levels prevailing just a few years ago.
It was therefore natural that an existing institution with systems and expertise for managing the country’s foreign exchange reserves was chosen to perform this task. It may be said that the fund was thought of as a savings account that the government opened at Norges Bank, alongside the government’s ordinary sight deposit account. 1/7  BIS central bankers' speeches  Chart: A large fund The return on this savings account has so far been good. Since the beginning of 1998, the fund has achieved an average annual return of 6 percent. In NOK terms, the total return came to more than NOK 3 800 billion at the end of September 2017. The return has been around ¼ percentage point higher than the return on the fund’s benchmark index. The annual real return has been 4 percent. Management costs have been low. Over time, they have fallen as percentage of assets under management down to 0.06 percent annually at present. Governance model and governance principles The Central Bank Law Commission has considered alternatives for the future organisation of the GPFG. Before I comment on the Commission’s conclusions, I would like to speak briefly about the current governance model and the interaction between the Storting, the Ministry and Norges Bank. Chart: Governance structure The legislative basis is decided by the Storting, while the Ministry of Finance lays down a management mandate that is issued to Norges Bank. Moreover, the Ministry has established a practice whereby decisive changes are submitted to the Storting for approval.