, we seek to generate value added in excess of the return that follows from the strategic allocation. the fund has achieved an average annual real return of 4. 25 per cent since 1997. the contribution to the return from active management has averaged 0. 39 per cent annually in the same period. active management has thus made a contribution of about 9 per cent of the fund ’ s total return. this result has been achieved without changes in the fund ’ s return variability or risk exposure. norges bank ’ s investment management has thus improved the risk to return trade - off. in the long run, even a small percentage increase in the average annual rate of return will have a substantial impact on the fund ’ s size. a stated goal of operational management is that a large number of investment decisions are to be taken independently of each other both at a given point in time and over time. norges bank will increasingly use the fund ’ s properties in developing investment strategies ahead, with particular emphasis on taking advantage of the fund ’ s size and long - term investment horizon. norges bank ’ s mandate sets the tracking error limit at 1. 5 percentage points. given this limit, the actual portfolio return is likely to deviate by less than 1. 5 percentage points from the benchmark portfolio in two of three years, but it also implies a risk that active management may reduce the return by more than 1. 5 percentage points every sixth year. in light of the size of the fund, this will be a substantial amount in krone terms. losses from active management must be expected in periods. losses are not necessarily an indication that active management is not conducted professionally or not using the right strategies. the performance of the fund ’ s investment management must be evaluated over a long time horizon. even if the contribution from active management was negative for the first time in the fund ’ s history last year, it does not change our confidence in and conviction that our organisation will contribute to achieving excess returns in the longer run. thank you for your attention.

useful tool, but due weight must be given to building strong automatic stabilisers into the financial system to reduce the risk of future bubbles. the topic of this conference is financial innovation. both adair turner2 and paul tucker3 have raised doubts about the social value of some of these new instruments. i quite agree : restrictive regulation of some of these instruments could contribute to stabilising financial markets. one could imagine that the regulator should evaluate the pros and cons of allowing any new instrument. at the very least, the regulator should make sure that any instrument traded in significant quantities is sufficiently transparent to be a useful risk shifter. in short, i agree with frank that the positive relationship between financial markets and economic growth has its limits. the difficult question is naturally where these limits are. it will be hard for a regulator to draw the line. but there are few other candidates for doing it. speech by adair turner on 18 february 2011, reforming finance : are we being radical enough? speech by paul tucker on 23 may 2011, building resilient financial systems : macroprudential regimes and securities market regulation bis central bankers ’ speeches