NORGES BANK S MANAGEMENT OF THE GOVERNMENT PENSION FUND GLOBAL GOVERNOR ØYSTEIN OLSEN

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Belinda Rich
7 years ago
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1 NORGES BANK S MANAGEMENT OF THE GOVERNMENT PENSION FUND GLOBAL GOVERNOR ØYSTEIN OLSEN

The oil fund mechanism Petroleum revenues and return on investments Non-oil revenues Statens pensjonsfond Government Pension utland Fund Pension Global Fund Global NOK 7,000 billion Transfer to

2 The oil fund mechanism Petroleum revenues and return on investments Non-oil revenues Statens pensjonsfond Government Pension utland Fund Pension Global Fund Global NOK 7,000 billion Transfer to finance non-oil budget deficit Central Statsbudsjettet government budget NOK 1,200 billion Fiscal rule (spend the real return of the fund over time, estimated at 4 %) Expenditures 2 Source: Norges Bank Investment Management and Ministry of Finance

3 Petroleum revenues and petroleum revenue spending In billions of NOK Petroleum revenue spending Petroleum revenues *) *) Norges Bank s estimate for 2016, based on impact calculations in the National Budget for Sources: Ministry of Finance and Norges Bank

4 The fund has grown In billions of NOK Inflows (after management costs) Krone exchange rate Return Source: Norges Bank

5 A fund owned by the Norwegian people Governance model Stortinget Government Pension Fund Act Annual white paper: Central government budget and accounts Stortinget Management mandate and ethical guidelines Quarterly and annual reports. Advice on investment strategy Stortinget 5

6 Norges Bank manages the fund Stortinget Executive Board of Norges Bank Investment mandate for the CEO Job description for the CEO The Executive Board s principles Reporting: Performance and risk Costs Compliance and control Corporate governance Responsible investing Stortinget 6

7 Management objectives OBJECTIVE HIGH LONG-TERM RETURN SUBJECT TO Acceptable risk Efficient organisation Responsible investing Transparency 7

8 Investment strategy Invest globally Take part in global value creation Diversify investments Diversify risk and return by global investments across asset classes Exploit the fund s characteristics Create return by exploiting the fund s longterm perspective and large size 8

Asset allocation STRATEGIC ALLOCATION AS AT 31.12.

9 Asset allocation STRATEGIC ALLOCATION AS AT % EQUITY % FIXED INCOME 0-5 % REAL ESTATE 9

10 Rebalancing Share of equities in the benchmark index and rebalancing triggers. Percent Share of equities Triggers Strategic weight Source: Norges Bank 10

11 Norges Bank s management tasks Advise Invest Total return Relative return 11

12 Management model True passive market Ministry of Finance Passive benchmark Weighted benchmark Norges Bank provides advice Norges Bank Rebalanced weighted benchmark Actual portfolio Norges Bank invests 12

13 The return of the fund is close to the index Fund and benchmark index. Index. January 1998= The fund Benchmark Source: Norges Bank 13

14 Investment strategies Benchmark indices FUND ALLOCATION SECURITY SELECTION MARKET EXPOSURE Actual portfolio 14

15 Fund allocation Benchmark indices Universe expansion Systematic factors Cost-efficient transitions Reference portfolio 15

16 Security selection Reference Faktiske portfolio indekser Analysis of individual companies Ownership Actual portfolio 16

17 STANDARD SETTING OWNERSHIP RISK MANAGEMENT Three pillars of responsible investment International standards Our expectations and principles Research into responsible investment Voting Interaction with companies Engaging with boards Monitor risk Industry initiatives Focus areas Environmentrelated mandates Risk-based divestments 17

18 Market exposure Reference Faktiske indekser portfolio Effective execution of trades Relative value Security lending Actual portfolio 18

19 Annual return Percent Annual return Cumulative annualised return since Q4 3.6% % Past 10 years 5.3% Since % Source: Norges Bank 19

20 Relative return Percentage points Annual relative return Cumulative annualised relative return 2015 Q4 0.11% % Past 10 years 0.06% Since % Source: Norges Bank 20

21 The Executive Board s assessment of results Expanded report on performance and risk Returns over time have been solid Equity and fixed income investments reported on separately 21

22 Investment strategies Annualised relative return Percent Fund allocation Security selection 0.12 Asset management 0.24 TOTAL

23 Management costs Basis points Upper cost limit Total costs Costs excluding performance-based fees Source: Norges Bank 23

24 Supervision and oversight of management EXECUTIVE BOARD Governor (Chair) Deputy Governor (First Deputy Chair) Deputy Governor (Second Deputy Chair) SUPERVISORY COUNCIL Audit Committee Remuneration Committee Ownership Committee Risk and Investment Committee Office of the Supervisory Council Internal Audit Norges Bank Central Banking Operations Norges Bank Investment Management 24

25 NORGES BANK S MANAGEMENT OF THE GOVERNMENT PENSION FUND GLOBAL GOVERNOR ØYSTEIN OLSEN

Norges Bank Investment Management The Norwegian Government Pension Fund - Global & NBIM

The Norwegian Government Pension Fund - Global & NBIM UKSIP Sovereign Wealth Fund Seminar Espen Klitzing,NBIM October 4, 2007 1 The Ranking of Oil Producers 2006 (mill b/d) Norges Bank Investment Management