Norway’s $1 trillion Insurance Policy
The anatomy of a Sovereign Wealth Fund.
Oliver is a florist in downtown Oslo. He runs a thriving business. Money has been flowing for decades from selling the flowers he grows in his garden to satisfied customers across the city. Oliver has no employees, he is helped to run his shop only by his family. That means he can’t fire them and has to support them in good times and in bad. The money he earns, he either spends to grow the business, or he saves in the bank.
Although business is good, Oliver is paranoid - He fears the day that nobody will buy the flowers he grows. This paranoia often gives him sleepless nights. If business tanks, he will have no choice but to dig into his savings, and once those are consumed - he, with his family, will end up on the street.
One day Oliver bumps into his friend, Mr. Salman, a Middle Eastern businessman. He tells Salman his predicament. Salman says he had the same problem but he fortunately found an ingenious solution.
Salman says,“The solution is rather simple. All you need to do is put your money in businesses other than your own. Maybe the beloved Restaurant down main street, or that fancy Tech startup in the Financial District, or even the sturdy cotton mill in the suburbs. Why don’t you maybe buy couple of buildings to rent out? That way if your business ever goes to 0, you have all these different businesses to rely on. And surely they can’t all fail, can they?”
Oliver is spellbound at the solution’s simplicity. He takes action and over time invests most of his extra profit in these businesses, all to get a good night’s sleep.
What Oliver has done here is distributed the risk of his one shop going out of business into a diverse group of businesses and properties all very different from each other. He has practically created his own insurance policy!
Oliver is no different from Norway. The difference is that Oliver sells flowers and Norway sells Oil (62% of its exports).
Norway also has Citizens - much like Oliver’s family, to whom it is responsible, and Norway also dreads of the day oil becomes redundant.
So what did Norway do - the same thing Oliver did, create an insurance policy, but through an agent - a Sovereign Wealth Fund.
A sovereign wealth fund takes a country’s extra money, usually earned through exports, and invests it across the world - in large corporations, startups, bank & government bonds, real estate and many other types of assets. Managing such money is no easy task and hence these funds employ some of the smartest minds on earth. Their job? Don’t lose the money and make more money.
The Sovereign wealth fund of Norway - called ’The Fund’ - is an interesting establishment. It is the largest of its kind in the world with over $1 Trillion in its control and uses the money to invest across the globe, In thousands of companies and multiple assets. All to secure Norway’s future.
I heavily recommend taking a look at the fund and its fascinating investments in this interactive map
The fund is incredibly progressive too, aligning with the Country’s values. For example it has actively monitored its investments for violations of Human Rights, Climate Reform, Nuclear Arms, Tobacco production etc. and has stepped back from investing in these spaces.
Norway is not alone however, with Saudi Arabia, the UAE and other gulf countries also having similar funds.
Together these funds have amassed great power over time to influence international relations and markets and they aren’t going anywhere anytime soon.