Norway does not have ATMs that give out gold.
It is not famous for selling homes on man-made islands.
It does not come to mind when we think of Rolls-Royce, sky-scrappers, or lavish people.
All of those are associated with Middle Eastern countries – because they have oil.
A less-known fact: Norway has lots of oil too.
Anywhere between 40 and 70% of their exports are oil and gas. But this was not always the case.
Towards the end of the 1950s, Norway was like any other European country.
They were not poor. But they did not produce oil.
And then, they found oil and gas – lots of it.
By the 1970s, they were commercially extracting oil and gas. They began exporting it.
And with that, the money started flowing in.
The Norwegian government had structured their oil and gas exploration in a specific manner.
Licenses were given to private companies to explore and dig.
It was all done in a manner in which the government of Norway would earn profits.
This allowed the Norwegian government to get a new source of income.
Lots of income.
This was a problem.
Yes – a good problem.
They knew that oil and gas would not last forever. Some day, it would finish. They would not be able to earn money from oil forever.
Norwegians did not want to blow away all their money in the present.
They wanted to save it so that future generations of Norwegians would benefit from it.
They set up a fund.
This fund would invest the money – just like a mutual fund.
Thus, in 1990, the government set up the Government Pension Fund. In 1996, money was first deposited into the fund.
Investment
Norway’s oil earnings are invested by the Government Pension Fund.
They invest in stocks, bonds, and real estate.
Just like a mutual fund, it has a team that decides where the money will be invested. There is a team that audits the fund.
There is a team that researches new investments, and which holdings to sell off.
And there is a person who heads this – like a fund manager.
But there is one giant difference between a mutual fund and the Government Pension Fund.
Anyone can invest in a mutual fund.
The Government Pension Fund has only one investor – the Government of Norway.
This fund is immensely successful.
Today, it manages assets worth about $1.5 trillion – or $1,500 billion.
This makes the Government Pension Fund the biggest fund of its kind in the world.
To give you some context, India’s biggest mutual fund company (SBI Mutual Fund) manages assets worth $86 billion only.
About 70% of the Government Pension Fund’s money is invested in shares of over 8,500 companies across 70+ countries.
About $22 billion of this fund’s money is invested in India.
Of the $1.5 trillion assets, only about half have come from direct contributions from oil profits.
The rest is the return from investing. The fund is performing well.
Last year, the fund made a gain of $213 billion.
Sovereign Wealth Funds
These extra-large mutual funds that serve governments are called Sovereign Wealth Funds (SWFs).
They usually have only one customer – their government.
Norway’s sovereign wealth fund is just one such fund. It is indeed the world’s biggest SWF.
But there are many others like it.
Abu Dhabi Investment Authority is the biggest SWF in the Middle East with holdings of over $800 billion.
China Investment Corporation reportedly has assets over $1.3 trillion.
Kuwait Investment Authority has assets over $900 billion.
Government Investment Corporation (GIC, Singapore) has assets over $700 billion.
There are SWFs based in Saudi Arabia, Hong Kong, Oman, Alaska (USA), Dubai, Turkey, South Korea, and many more.
Norway’s SWF is famous for being incredibly transparent. All details about its holdings are publicly available.
But this is not the case with all SWFs.
Since these are government-controlled and operated funds, many SWFs choose to not reveal their holdings.
This makes it difficult to estimate how much money they have invested.
Like any mutual fund, they also have specific goals with regards to their investments.
Some invest more in technology stocks. Some put a lot of focus towards renewable energy companies. The goals are varied.
These funds control vast amounts of money.
Often, these amounts are so large, they can affect entire stocks and stock markets.
SWFs have been investing in India heavily. With time, they have only increased their investments.
In 2023, SWFs had invested a total of $43 billion (Rs 3.65 lakh crore) in India. 5 years ago, this was only Rs 1.62 lakh crore.
Singapore’s SWF is one of the biggest investors in India – around Rs 1.7 lakh crore invested.
Norwegian, Saudi, and Kuwaiti SWFs are also big investors.
When you read the news that ‘foreign institutional investors invested XYZ amount’, you should know that a part of those investments is usually made up by SWFs.
Reliance, ICICI Bank, HDFC Bank, L&T, Bajaj Finance, Infosys, Axis Bank, and Mahindra are some of the stocks SWFs have invested heavily in.
SWFs have also invested in upcoming start-ups in India. Some names are Delhivery, Zomato, and Lenskart.
They are quite unique.
They basically invest tax-payers money. In a way, this money belongs to all the people of that country.
The idea is quite new to many of us.
And yet, they have more money than most other kinds of funds.
Sovereign Wealth Funds are huge.
As they get more bullish about India, we will hear about them more often.
The images above were generated using AI tools.
Quick Takes
+Vivo was the top smartphone brand by sales in India for the Jan-March quarter. Xiaomi was 2nd and Samsung was 3rd: Counterpoint Research.
+India crossed Japan to become the world's 3rd largest solar power generator in 2023: Ember.
+SIP investments crossed the Rs 20,000 cr level in April (Rs 20,371.47 cr): AMFI.
+India became the 1st country to receive remittances over $100 billion – received $111 billion in 2022: World Migration Report 2024.
+NSE will conduct a special trading session on 18 May to test preparedness for unexpected incidents.
+Disney+ Hotstar’s paid subscriptions fell by 23 lakh to 3.6 cr in the Jan-March quarter.
+CDSL (India's largest depository) opened a record 1.09 cr Demat accounts in the March quarter. Registered Demat accounts now stand at over 11.56 cr.
+Investments in Indian stock markets through promissory notes rose to a 6-year high in Feb to Rs 1.5 lakh cr: SEBI data.
6-Day-Course
Theme of the week: gold as an investment option
We’ve reached the end of this week’s course that started on Monday. Here’s a test you should take. Get pen and paper!
Question 1:
What makes gold an attractive investment?
-Indestructible
-Easy storage and reshaping
-All of the above
Question 2:
Investors use gold as a hedge against inflation.
-True
-False
Question 3:
US Dollar is a global currency that is accepted everywhere, even more than gold.
-True
-False
Question 4:
You can buy gold through ______ ?
-ETFs
-ETFs, physical gold, MFs, bonds
-Only from a jewellery shop
Question 5:
Historically, ______ has given the highest returns.
-Gold
-US Stock market
Answers:
Q1: All of the above
Q2: True
Q3: False
Q4: ETFs, physical gold, MFs, bonds
Q5: US Stock market
The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.
Team Groww Digest