The questions:

1. What challenges are you currently facing in trying to generate sufficient returns for your fund members?
   
   
2. Are there any particular asset classes that you do not invest but find interesting?
   
   
3. Are you looking to allocate more of your assets overseas. If so why and in what particular asset class?
   
   
4. Norway is to launch local regulations for hedge funds this year. Will the regulations change the way you view and invest in hedge funds?
   
   
5. Do you find consultants useful and in which areas of investment do you/would you consider using them?
   
   
6. The new obligatory tjenestepensjon legislation. How does it affect your fund?

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Solveig Åsland, general manager, Statoils Pensjonskasse

1. As long as a large proportion of our assets consist of bonds (due to domestic legislation), the low interest rate level remains a challenge. For the past two to three years we have experienced rising equity markets, which has given us good returns from our investments.
   
   
2. We are currently not looking at investment opportunities in asset classes where we are not already invested. However, if opportunities arise, we might increase allocation to some of the asset classes where we already have some minor investments.
   
   
3. A relatively large proportion of our fund is currently invested overseas, mainly in the US. We do not expect to increase our overseas investments beyond the current relative proportion of our total assets.
   
   
4. This will not have any effect on our investments. We have studied hedge funds for many years already and decided not to invest in the asset class. The risk return profile for the aggregate asset class and high fee structure does not add sufficient value as we see it.
   
   
5. We use our in-house expertise on asset management as our main strategic adviser. In this area consultants are not an issue. The only area where we use consultants is to advise on shortlists for manager selection and monitoring processes.
   
   
6. The new obligatory pension will not affect our fund. We administer a defined benefit scheme for Statoil and the Norwegian subsidiaries. The benefits from our fund require an annual premium for each member, which is higher than the minimum contribution described in the new legislation.

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Tom Jarneid, CIO,Telenors Pensjonskasse

1. A low real interest rate compared to a high growth in real wage forces us to look at other asset classes outside fixed income. The problems derive partly from the regulations imposed by Kredittilsynet, which places limits on equity exposure and other asset classes such as alternatives, and partly from the legal requirements of how we must operate as a pension fund.
   
   
2. Commodities could be an interesting asset class, but at the moment the Norwegian stock market is heavily dependent on oil, shipping and materials. We have a small part of our assets invested in alternatives, mainly in hedge funds but also in private equity. I do not see an expansion of our alternatives portfolio for the moment.
   
   
3. Internal regulations set by Telenor’s board stipulate a minimum exposure of 20 per cent into Norwegian equities. We already have 80 per cent of our equity portfolio invested abroad therefore we are not planning to introduce any material changes in our investments, at least for the time being.
   
   
4. I do not expect to see any notable expansion of hedge fund investing among Norwegian pension funds, because the creation of an onshore hedge fund market will not influence local pension funds directly. Investment regulations will continue to limit hedge fund exposure to 5 per cent.
   
   
5. So far we have relied on internal resources and have not used consultants to help us with our investment activities. We feel that a more important issue for Telenor is to find out how much risk the company is able to take to fund its pension scheme. This is a wider issue in which the help of consultants is bound to be limited.
   
   
6. The new legislation does not affect us. However, from 1 January 2006 Telenor closed its defined benefit plan to new members. At the same time, a new defined contribution plan was established for new employees.

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Thor Johnsrud, chairman of the board, Nordeas Norges Pensjonskasse

1. The main challenge is that expected returns in the financial markets have fallen over recent years. Official interest rates and long-term yields have fallen to very low levels and the valuation of stock markets has increased somewhat. This development has resulted in high returns on assets over the last two to three years but will cap the expected return going forward.
   
   
2. The pension fund is invested in all the asset classes that we find interesting. Other asset classes are discussed from time to time and may be considered relevant in the future. The investment universe of the pension fund is defined more broadly than the current allocation.
   
   
3. There is a decent allocation to overseas assets already. It provides diversification and is considered appropriate given the size of the Norwegian financial markets and the fact that the pension fund has its liabilities in NKr. There are no plans to invest more in overseas assets.
   
   
4. No, that is not likely. We will decide on hedge funds based on whether they are considered an attractive investment or not. But it is of course good if regulations are open towards hedge funds. We have already discussed introducing hedge funds as an asset class, but no investment has been made so far.
   
   
5. Direct use of external consultants in terms of asset management has not been common. The pension fund currently relies on the advice it gets from the group treasury, which can be regarded as a consultant for asset management. But the group treasury may use consultants to carry out special tasks with regard to selected asset classes like real estate and maybe hedge funds.
   
   
6. As the Nordea Bank Pension Fund has a pension plan with benefits above the minimum standard in the new legislation, this new legislation will not affect us at all.
   

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Rune Mæle, pension fund manager, Norske Shells Pensjonskasse

1. The current investment regulations covering Norwegian pension funds place several restrictions on our investments and in fact, limit our ability to take sufficient risks. Also the current low interest rate environment is a challenge, particularly as the current regulatory framework offers limited opportunities for diversifying into alternatives asset classes.
   
   
2. If the current regulations, which allow us to place a maximum of 5 per cent of our holdings into asset classes other than bonds and equities, is revised, we would be very keen to consider alternative asset classes. These could include investment tools such as private equity and hedge funds. We might also be interested in investing in property.
   
   
3. The Norwegian equity market is currently leaning increasingly towards offshore stocks, which in itself increases risks. It is therefore important to consider increasing exposure to global equities – especially in emerging market countries – as well as overseas property. These are the two key foreign assets we might consider in the future.
   
   
4. The creation of an onshore hedge fund market in Norway will not remove the fact that hedge funds remain an asset class into which only limited exposure is allowed. The new regulations will not change the way we view hedge funds.
   
   
5. We do find consultants useful and use local consultants for reviewing and advising us with ALM studies and for regulatory advice. However, most of the time we use our own internal expertise.
   
   
6. The new obligatory tjenestepensjon legislation introduced this year in Norway does not directly affect our scheme. This is because our scheme already provides more than the minimum contribution, which is well in line with market practice in the oil industry. In addition, our system already covers all the employees of A/S Norske Shell in Norway.