GAPP Principle 18
The SWF’s investment policy should be clear and consistent with its defined objectives, risk tolerance, and investment strategy, as set by the owner or the governing body(ies), and be based on sound portfolio management principles.
- GAPP 18.1 Subprinciple The investment policy should guide the SWF’s financial risk exposures and the possible use of leverage.
- GAPP 18.2 Subprinciple The investment policy should address the extent to which internal and/or external investment managers are used, the range of their activities and authority, and the process by which they are selected and their performance monitored.
- GAPP 18.3 Subprinciple A description of the investment policy of the SWF should be publicly disclosed.
Status: Implemented
The Government Pension Fund Act states that the investment objective shall be the highest possible return at an acceptable level of risk and that within the scope of this objective, the Fund shall be managed responsibly. The investment policy is formed accordingly. The annual white paper submitted to Parliament by the Ministry of Finance reports on the development of the investment strategy of the GPFN. The strategy is founded on investment beliefs and the distinctive characteristics of the Fund. The strategy is operationalised in the management mandate set by the Ministry. The mandate specifies objectives, risk tolerance and investment strategy. The objective of the asset manager is to maximise long-term return net of costs measured in Norwegian kroner, subject to the specified risk limits.
The mandate also covers provisions on risk exposures, leverage, benchmark indices and outsourcing. Folketrygdfondet has published additional information on its investment strategies and risk management approach. Furthermore, the mandate stipulates that all dealings with third parties shall be in accordance with the economic interests of the GPFN. At present, Folketrygdfondet does not employ external managers in the management of Fund. Folketrygdfondet may, however, make use of external managers and outsource operational functions if risk management and internal control considerations are attended to.
Sources: Government Pension Fund Act, GPFN mandate, Ministry of Finance’s and Folketrygdfondet’s websites.