RETURN AND RISK GOVERNMENT PENSION FUND GLOBAL PRESS SEMINAR OSLO, 06 MARCH 2018

Transcription

1 RETURN AND RISK GOVERNMENT PENSION FUND GLOBAL PRESS SEMINAR OSLO, 6 MARCH 218

2 Extended information in three publications 2

3 1 2 INVESTMENTS 1.1 The fund s investments Benchmark index Reference portfolio 18 RETURN 2.1 Return Relative return Return and cost 46 3 RISK 3.1 Risk Relative risk Risk adjustments 6 APPENDIX Factor and risk-adjusted returns

4 Management of the fund Market Market index Ministry of Finance Reference index Norges Bank Investment Management Reference portfolio Actual portfolio Source: Ang et al (214). Norges Bank Investment Management 4

5 INVESTMENTS 5

6 Reference portfolio adjustments for equities Over-weighted stocks. Percent (chart 5 and 6) Systematic factors Universe expansion Free float 6

7 Reference portfolio adjustments for fixed income Over- and under-weighted bonds. Percent (chart 7 and 8) Emerging markets Fiscal strength

8 Contributions from equity adjustments Versus the benchmark index. Percentage points (chart 9 and 1) Systematic factors Universe expansion Free float -1. 8

9 Contributions from fixed-income adjustments Versus the benchmark index. Percentage points (chart 11 and 12) Emerging markets Fiscal strength -2. 9

10 Return impact of ethical exclusions Equities. Percentage points (chart 4) Conduct-based exclusions Product-based exclusions Total

11 Contribution to return impact Equity benchmark index exclusions by exclusion criterion (table 12) Criterion Number of excluded companies from benchmark Market value in benchmark if not excluded annualised Product-based exclusions Production of specific weapon types Production of tobacco Thermal coal mining or coal based power production Conduct-based exclusions Serious or systematic human rights violations Serious violations of the rights of individuals in situations of war or conflict 1.. Severe environmental damage Gross corruption 1.. Other particularly serious violations of fundamental ethical norms Total

12 RETURN 12

13 13.7 percent return Annual absolute return on the fund. Percent (chart 1) % % Annual return % -1 Accumulated annualised return since Last 1 years 6.2% Since %

14 Absolute return key figures Currency basket. Annualised. Percent (table 15) Since Last 1 years Last 5 years 217 Return on equity investments Return on fixed-income investments Return on unlisted real estate investments Return on fund Since Includes listed real estate investments from 1 November 214 to the end of

15 Fund return Measured in different currencies. Annualised. Percent (table 18) Since Last 1 years Last 5 years 217 Currency basket Norwegian Krone US Dollar Euro British Pound Euro was introduced as currency on WM/Reuters Euro rate is used as estimate for

16 The fund s real return Measured in the fund s currency basket. Annualised. Percent (table 17) Since Last 1 years Last 5 years 217 Fund return (nominal) Annual inflation Annual management fees Real return

17 Positive relative return Quarterly relative return of the fund. Percentage points (chart 15) Quarterly relative return Accumulated annualised relative return

18 Relative return Currency basket. Annualised (table 27) Since Last 1 years Last 5 years 217 Relative return on fund (percentage points) Relative return on equity management (percentage points) Relative return on fixed-income management (percentage points) Includes real estate management from Relative return prior to 217 is calculated on the equity and fixed-income management only. 2 Equity management since

19 Contributions to relative return 217 Percentage points (table 29) Equity management Fixed-income management Real estate management Allocation Fund allocation Internal reference portfolio of which systematic factors.2.2 of which universe expansion Allocation decisions Real estate.3.3 Unlisted real estate.2.2 Listed real estate.1.1 Security selection Internal security selection External security selection Asset management Asset positioning Securities lending Total Total 19

20 Contributions to relative return Annualised. Percentage points (table 3) Equity management Fixed-income management Real estate management Allocation Fund allocation Internal reference portfolio of which systematic factors.2.2 of which universe expansion Allocation decisions Real estate.1.1 Unlisted real estate.. Listed real estate.. Security selection Internal security selection External security selection Asset management Asset positioning Securities lending Total Total 2

21 Management cost per asset class Basis points (chart 18) Equity Fixed Income

22 Management costs per investment strategy 217. Basis points (table 31) Contribution to the fund's management costs Management costs based on assets under management Fund allocation.9 of which unlisted real estate Security selection Internal External Asset management Total 6. 1 Includes all externally managed capital. 22

23 RISK 23

24 The fund s equity exposure Percent (chart 2)

25 The fund s equity exposure vs market Percent (chart 2) Equity exposure Equity market share Source: MSCI World index and Bloomberg BGA/NBIM calculations 3 25

26 Annual return of 7/3 portfolio Hypothetical. US dollars. Percent (chart 22) Source: Dimson, Marsh and Staunton s world return time series Equity contribution 7 equity/3 fixed income 26

27 1-year rolling return of 7/3 portfolio Hypothetical. Annualised. US dollars. Percent (chart 24) Equity contribution equity/3 fixed income Source: Dimson, Marsh and Staunton s world return time series -5 27

28 Expected absolute volatility Percent (chart 25)

29 Expected relative volatility Basis points (chart 27)

30 Return on the fund and the benchmark index Currency basket 6% 5% 4% 3% 2% Fund Benchmark index 1% %

31 The fund s benchmark overlap Percent (chart 29) Fixed-income asset class Equity asset class

32 Expected relative volatility by strategy Basis points (table 38) Equity management Fixed-income management Real estate management Allocation Fund allocation Internal reference portfolio of which systematic factors of which universe expansion Allocation decisions Real estate Unlisted real estate Listed real estate 9 9 Security selection Internal security selection External security selection 6 6 Asset management Asset positioning Total Total 1 A considerable part of the exposure against systematic factors will in 218 be managed and reported in a separate substrategy. 32

33 Expected relative volatility and shortfall Basis points (table 42) Expected relative volatility Expected relative volatility Expected shortfall 3-years price history 1-years price history 1-years price history Fund allocation Internal reference portfolio of which systematic factors of which universe expansion Allocation decisions Real estate Unlisted real estate Listed real estate Security selection Internal security selection External security selection Asset management Asset positioning Total

34 Intercept, bps annualised Market (MKT) Small vs Large (SMB) Cheap vs Expensive (HML) Profitable vs unprofitable (RMW) Conservativ e vs Aggressive Investment (CMA) Variance explained in percent (R squared) Regression analysis of relative return Equity management. In US dollars. Before management costs (table 49) Regression coefficients Sample period Since Last 1 years Last 5 years , Kenneth French. Bold indicates significance at 5 percent confidence level. 34

35 RETURN AND RISK GOVERNMENT PENSION FUND GLOBAL PRESS SEMINAR OSLO, 6 MARCH 218