Nicolai Tangen is defending Norway’s approach to investing as technology stocks account for a growing share of the country’s national savings. In a submission to the Treasury in September, Norges Bank Investment Management CEO and central bank governor Ida Wolden Bache recommended against imposing caps on individual companies or industries. They warn how quickly the mammoth fund could be sold during the crisis, which helps explain the stakes.
Last summer, as many countries around the world rearranged their wake-up times during the World Cup, Norway provided an unexpected reason to keep watching. Led by Manchester City’s blond striker Erling Haaland, the team reached the quarter-finals for the first time. Those familiar with Haaland’s appetite for goals may have seen this coming. The picture presented to his country’s supporters, however, was less predictable.
In stadiums and city squares around the world, Norwegian fans crouched in rows, flexing and flexing in unison, chanting “Ro! Ro! Ro!” — “Row! Row! Row!”
Thousands of people, an imaginary Viking longship, everyone working together.
It was a brazen display of collective determination that helped define the Norwegian spirit. But perhaps the most important manifestation of this common purpose has been demonstrated away from the football field, but in the patient accumulation of the country’s vast wealth.
Norway has methodically invested the proceeds from its offshore North Sea oil and gas resources since its sovereign wealth fund, formally known as the Government Pension Fund Global (GPFG), received its first capital injection in 1996. Norway’s sovereign wealth fund is managed by Norges Bank Investment Management (NBIM), the investment management arm of Norway’s central bank, and embodies a commitment to future generations that outlives governments and has withstood multiple global financial crises.
Deposits and investment returns have built GPFG into the world’s largest sovereign wealth fund: at more than $2 trillion, it’s larger than the sovereign funds of Saudi Arabia, Abu Dhabi, Kuwait or Qatar.
It’s a remarkable legacy for a country of just 5.6 million people, but it also ties Norway’s future to forces far beyond its shores.
Too big to diversify
At some point during the voyage, Norway acquired a large swath of Silicon Valley, leaving its national savings increasingly exposed to the technology’s heightened expectations and sudden reversals.
For most institutional investors, it would be prudent to cut winners and take profits. For Norway, this raises an even more troubling question: What happens when investors trying to reduce risk become large enough to pose a risk to everyone else? The retreat of U.S. technology stocks could send shockwaves to a market increasingly reliant on these companies. Could Norway’s efforts to protect its national reserves help spark the sell-off it hopes to emerge from?
Wall Street knows what “too big to fail” means. Is Norway’s sovereign wealth fund too big to diversify?
“The main limiting factor is the directive: the benchmarks and risk limits set by the Treasury and Norges Bank’s executive board define how far we can deviate from the market,” NBIM deputy chief executive Trond Grande told The Observer. “We would not say the fund is too big to be diversified.”
Technology investments accounted for about 32% of GPFG’s stock portfolio as of mid-year, up from about 20% five years ago. This makes technology about 23% of the overall fund, compared with about 14% in 2021 – although these figures cover the industry globally.
Success helps inspire focus. In the first half, its technology investments returned more than 25%, nearly double the return on its stock portfolio as a whole.
“We see [the concentration in tech] “This is a characteristic of the market, not a position we take,” Grande commented.
For Ottaviano Canuto, a former World Bank vice president and International Monetary Fund executive director, counting holdings only tells part of the story.
“It’s diversifying across the market, not away from it, so the scaling back of technology and artificial intelligence will hit it hard,” he told the Observer.
Yet Canuto described Norway as “more of a price taker than a price setter”. Its gradual trading and relatively small flow compared to the volume of liquid stocks moderates its impact on the market.
However, patient reassignment is not the same as emergency exits.
In a September submission to the Treasury signed by Norges Bank Governor Ida Wolden Bache and NBIM Chief Executive Nicolai Tangen, Norges Bank warned that the size of the fund severely limited rapid sell-offs during a crisis. A hypothetical AI disappointment scenario in 2025 estimates its value will drop by 35% – this is a stress test, not a prediction. Still, the bank recommended against placing caps on companies or industries, citing potential loss of returns and its limitations in capturing AI risks.
Norway’s real strength is its ability to wait. With no short-term liabilities and a horizon that spans generations, it can withstand the turmoil that might force others to sell.
The fund’s third-quarter results, released on Oct. 22, were disappointing: a loss of 0.5%. Fixed income investments fell 3.5%, while equity investments rose 0.5%. Even a portfolio built over generations can take three months to look back on.
A stronger Norwegian krone also reduced the value of the fund’s foreign assets expressed in krona, while new government deposits partially offset the decline. This monetary effect is separate from ROI. As of the end of September, the fund was worth 22,014 billion crowns, or about 22 trillion crowns.
But even if NBIM decided to divest its tech business, it would immediately face another dilemma: Where can it find an alternative big enough to impact a $2 trillion portfolio?
“At our scale, few investments can have a real impact,” Grande acknowledged. The deal may be large by normal standards, but it barely registered in Oslo.
Case in point: GPFG recently committed €1.2 billion to a renewable energy fund managed by Copenhagen Infrastructure Partners, experts in developing large-scale energy projects. This is an allocation of more than a billion dollars and less than a tenth of Norway’s investment portfolio.
Such investments are “unlikely to materially change the fund’s overall risk profile,” Grand said.
soft power
Whether Norway admits it or not, three decades of patient investment have also built something that balance sheets cannot fully reflect: extraordinary reserves of soft power.
“The fund gives Norway’s soft power a financial dimension,” said Kristian Hvilen, head of the Norwegian office of Rud Pedersen, a leading European public affairs firm.
“The challenge is not a lack of confidence,” he said. “We are reluctant to characterize the combined effect of these advantages as national strength.”
Norway incorporates judgments about corporate conduct into the shareholder register. Its ethical exclusions prevent tobacco producers, certain weapons manufacturers and companies involved in human rights abuses from accessing funding. Being deemed unsuitable for Norwegian savings could result in reputational damage along with the sale of shares.
But the influence goes both ways.
“Portfolios may be globally diversified while returns remain strongly influenced by U.S. technology, regulatory, trade policy and geopolitical tensions,” Heveren told the Observer.
He believes the fund’s advantage lies in continuing to serve as a savings vehicle rather than an instrument of state power. Financial purposes, however, do not eliminate political significance.
For countries such as Guyana, Suriname and Uganda seeking to turn their oil wealth into a lasting financial legacy, Norway offers an enticing model. Yet Canuto sees a potential pitfall: If more sovereign funds invest based on the same market benchmark, more money will flow into the same dominant companies. The geopolitical irony cannot be ignored. Countries laying the foundations for financial independence may deepen their dependence on U.S. technology.
Grande emphasized the discipline behind Norway’s success: a clear mandate, a long-term investment horizon and institutions that separate politics from day-to-day investment decisions. “We can’t speak for other countries and every country has different needs.”
“Ro! Ro! Ro!” was the chant that echoed in football stadiums and city squares last summer – a loud expression of national determination that is equally formidable, if less visible, in global finance. Thirty years of concerted efforts have given Norwegians an economic strength that is the envy of other major powers.
But if Norway chooses to swim against the tide, world markets may find out just how much