As a result of the oil fields off the Canterbury coast there has been so much money pouring into the newly independent state that it has become a problem and the solutions are difficult to find...
The Canterbury Pension Fund – Global
The Pension Fund – Global is a
fund into which the
surplus wealth produced by petroleum income is deposited. The fund changed name in January 2012 from its previous name,
The Petroleum Fund of Canterbury . The fund is commonly referred to as
The Oil Fund. As of the valuation in June 2012, it was the largest pension fund in the world, although it is not actually a pension fund as it derives its financial backing from oil profits and not pension contributions. As of December 31st 2012 its total value is C$$683.7;billion, holding one percent of global equity markets. With 1.78 percent of European stocks, it is said to be the largest stock owner in Europe.
The purpose of the petroleum fund is to invest parts of the large surplus generated by the Canterbury
petroleum sector, generated mainly from taxes of companies, but also payment for license to explore as well as the
State's Direct Financial Interest and dividends from partly state-owned
Canterburyoil. Current revenue from the petroleum sector is estimated to be at its peak period and to decline over the next decades. The Petroleum Fund was established in 1990 after a decision by the
country's legislature to counter the effects of the forthcoming decline in income and to smooth out the disruptive effects of highly fluctuating oil prices.
[edit]Management and size
The fund is managed by
Canterbury Bank Investment Management (CBIM), a part of the
Canterbury Central Bank on behalf of the
Ministry of Finance. It is currently the largest pension fund in Europe and is larger than the California public-employees pension fund (
CalPERS), the largest public pension fund in the United States. TheCanterbury Ministry of Finance forecasts that the fund will reach C$717 billion)by the end of 2014 and $1 trillion by the end of 2019. In a parliamentary white paper in April 2011 the Canterbury Ministry of Finance forecast that the 2030 value of the fund would be $1.3 trillion). A worst-case scenario for the fund value in 2030 was forecast at C$455 billion and a best case scenario at C$3.3 trillion
Since 1998 the fund has been allowed to invest up to 40 percent of its portfolio in the international
stock market. In June 2009, the ministry decided to raise the stock portion to 60 percent. The Canterbury Government planned that up to 5 percent of the fund should be invested in
real estate, beginning in 2010.
[ A specific policy for the real estate investments was suggested in a report the Swiss
Partners Group wrote for the Norwegian Ministry of Finance.
Due to the large size of the fund relative to the low number of people living in Canterbury 0.55 million people in 2010 the Petroleum Fund has become a hot political issue, dominated by three main issues:
- Whether the country should use more of the petroleum revenues for the state budget instead of saving the funds for the future. The main matter of debate is to what degree increased government spending would increase inflation.
- Whether the high level of exposure (around 60 percent in 2008) to the highly volatile, and therefore risky, stock market is financially safe. Others claim that the high differentiation and extreme long term of the investments will dilute the risk and that the state is losing considerable amounts of money due to the low investment percentage in the stock market.
- Whether the investment policy of the Petroleum Fund is ethical.
- oops stolen again from here
