As in 1998, the return on the Petroleum Fund fluctuated widely through the year. The return in the third quarter was negative, at -0.8 per cent, while the return for the fourth quarter was a full 8.0 per cent, measured in international currency.

In 1999 the equities market was characterised by large differences in returns, both from country to country and from one sector to another. About half of the overall return can be attributed to sharp share price rises in the IT sector.

The overall return measured in NOK was 13.9 per cent in 1999. The krone depreciated slightly against the currencies in which the Petroleum Fund is invested, and this depreciation pushed up the return measured in NOK. However, since the purpose of management is to increase the international purchasing power of the Petroleum Fund, changes in the krone exchange rate are of little relevance.

In 1999 Norges Bank achieved a return that was 1.11 percentage point higher than that of the benchmark portfolio defined by the Ministry of Finance. The excess return is largely due to the extremely good results achieved by the external managers of the equity portfolio.

In the period 1997 to 1999, the average return measured in international currency was 10.2 per cent. The inflation rate in the countries in which the Petroleum Fund is invested has been 1.3 per cent. This means that the international purchasing power of the investments has increased at an annual rate of 8.8 per cent in this three-year period.

At the end of 1999, the value of the Petroleum Fund's assets abroad was NOK 222.4 billion. Transfers amounting to NOK 24.5 billion were made by the Ministry of Finance during the year. A total of NOK 165.7 billion has been transferred since the establishment of the Petroleum Fund. Of the return of NOK 26.1 billion in 1999, NOK 23.1 billion represents an increase in value measured in international currency, while NOK 3.0 billion can be ascribed to the depreciation of the krone, and therefore does not represent an increase in the Fund's international purchasing power.

New managers appointed

Norges Bank has selected three external organisations to conduct active management of portions of the fixed income portfolios in the Petroleum Fund and Norges Bank's foreign exchange reserves. They are Bridgewater Associates Inc, USA, Gjensidige NOR Kapitalforvaltning and Morgan Stanley Dean Witter Investment Management, UK. Funding of these managers will take place within the first six months of 2000.