At first glance, the balance sheet reads catastrophic: the Norwegian sovereign wealth fund lost EUR 150 billion in the past year – 14.1 percent. The deficit has never been larger in absolute terms, only once in percentage terms during the 2008 financial crisis.
The reasons are obvious, but actually apply to the entire financial market. "It's been a tough year all over the world," said fund manager Nicolai Tangen at a press conference in Oslo. The market was influenced by the Ukraine war, high inflation and rising interest rates. This has affected both the stock and bond markets at the same time, which is very unusual. All sectors of the stock market had negative returns - with the exception of the energy sector.
The news caused a stir, especially in Germany, as the federal government is currently working on a similar project with the share pension. The Norwegian sovereign wealth fund is now an example of how gambling endangers a country's prosperity, has been criticized. Green member of the Bundestag Andreas Audretsch said on Twitter: "One thing is clear: We Greens will not jeopardize the pensions of millions of people in Germany through speculation on the stock market." A few days earlier, his party colleague Frank Bsirske put it similarly: "Our pension system cannot be made fit for the next few decades by speculating on stocks." The criticism of the share pension is also great from the SPD, the left and parts of the AfD.
But the example of the Norwegian sovereign wealth fund also shows how unfounded the criticism is. In fact, the paper loss this year is considerable. But what is much more important: Since it was launched in 1996, the fund has brought in returns of over 6.3 trillion crowns (around 580 billion euros) despite all the crises. Added to this are around 180 billion euros from currency gains, which stem from the massive investments in foreign assets. So if you zoom out from the short-term perspective, you see ample profits. This is also shown by a chart published by investment expert Christian W. Röhl on Twitter.
For many years, the Norwegian sovereign wealth fund was considered a blueprint for how states could invest their money in the capital market. It generates an average annual return of 6.3 percent and has an attractive total expense ratio (TER) of 0.05 percent. Norges Bank Investment Management (NBIM) invests the money worldwide. The fund owns an average of 1.1 percent of the shares in thousands of companies – around 1.03 percent in Apple or 1.13 percent in Microsoft. In Germany, NBIM owns significant shares in the housing group Vonovia (14.6 percent) and the food start-up HelloFresh (7.15 percent).
The strategy has paid off over the years: Calculated in kroner, every Norwegian is a millionaire with a total volume of 12.4 trillion kronor - in euros that's at least 200,000 euros. And it's growing every year. Norway finances its fund from the oil revenues, which is also the big difference to the planned German model.
The proposal by Finance Minister Christian Lindner (FDP) provides for a debt-financed model. That costs even more money. Either the state borrows money from banks or issues a bond that would bear interest of around 2.3 percent over ten years, for example. The planned fund would first have to exceed this 2.3 percent. Mixed models, into which tax revenues could flow, for example, have so far failed for political reasons.
The fund is scheduled to be launched this year. Initially, 10 billion euros are to flow in, which are to be invested worldwide. The fund volume should then increase by the same amount every year until 2037. From then on, the fund should massively relieve pension financing. So far, however, there are still a number of unanswered questions: for example, how risky the fund can invest - or whether it has to meet certain sustainability criteria.
Some doubt whether this can be achieved at all. In addition to Bsirske and Audretsch, Ulrich Schneider, general manager of the German Parity Welfare Association, also warns against "gambling" with pensions. "Even if you invest the capital very conservatively, there are significant risks."
The German Federation of Trade Unions also followed up yesterday in the "Neue Osnabrücker Zeitung". There, board member Anja Piel said: "If the Minister of Finance keeps dreaming of gambling with the contributors' money for his share pension project, he can wrap up warmly." Lindner, believes Piel, wants to drive employees into the arms of the private insurance industry. Only the financial industry and employers win.
First published by Capital.de