GOVERNMENT PENSION FUND GLOBAL ANNUAL REPORT 217
8,488 billion kroner in the fund Market value as at 31.12.217. Billions of kroner 8,488 9, 8, 7, Value Percentage share Equity investments 5,653 66.6 Fixed-income investments 2,616 3.8 Real estate investments 219 2.6 9, 8, 7, 6, 6, Fixed income 5, 4, 5, 4, Real estate 3, 2, 3, 2, Equity 1, 1, 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 Source: Norges Bank Investment Management 2
Inflow / outflow After management fees. Billions of kroner 4 4 3 3 2 159 2 Inflow/outflow 1 1 Average inflow since 1998-1 -1-65 -2 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17-2 Source: Norges Bank Investment Management 3
1,28 billion kroner return in 217 Accumulated market value as at 31.12.217. Billions of kroner 9, 8, 1,4 9, 8, 7, 7, 6, 6, Kronekurs 5, 4, 4,151 5, 4, Avkastning 3, 2, 1, 3,298 3, 2, 1, Tilførsel (etter forvaltningsgodtgjøring) -1, 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18-1, Source: Norges Bank Investment Management 4
3 out of 4 kroner of return past five years Accumulated return as at 31.12.217. Billions of kroner 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5-5 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 Source: Norges Bank Investment Management 4,151 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5-5 5
Change in market value Annual change in market value. Billions of kroner 1,5 1,5 1, 1, Krone rate 5 5 Return Inflow -5-5 Total -1, 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 Source: Norges Bank Investment Management -1, 6
Change in market value in different currencies NOK, USD and EUR. Billion currency units 1,1 11, 1, 1, 9 8 7 6 9, 8, 7, 6, USD (left axis) EUR (left axis) NOK (right axis) 5 5, 4 4, 3 12 13 14 15 16 17 Source: Norges Bank Investment Management 3, 7
13.7 percent return Annual return. Percent 3 3 2 13.7% 2 1 1 6.1% Annual return -1 4Q 217 3.5% 217 13.7% -1 Accumulated annualised return since 1998-2 Last 1 years 6.2% Since 1998 6.1% -2-3 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17-3 Source: Norges Bank Investment Management 8
Good return in all asset classes Measured in the fund s currency basket. Percent 4 4 3 3 2 1 2 1 Equity -1-2 -1-2 Fixed income Real estate -3-4 -5 217 216 Equity investments 19.4 % 8.7 % Fixed-income investments 3.3 % 4.3 % Unlisted real estate investments 7.5 %.8 % Total 13.7 % 6.9 % 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 Source: Norges Bank Investment Management -3-4 -5 9
Good return on the fund Key figures measured in the currency basket. Annualised. Percent 217 Past 5 years Past 1 years Since 1.1.1998 Return on fund 13.7 9.3 6.2 6.1 Annual inflation 1.8 1.3 1.7 1.8 Annual management fees.1.1.1.1 Annual net real return 11.6 7.8 4.4 4.2 Source: Norges Bank Investment Management 1
Total return Billions of kroner 4,5 4, 4,151 4,5 4, 3,5 3,5 Actual return 3, 2,961 3, 2,5 2,284 2,5 4% real return 2, 2, 1,5 1,5 3% real return 1, 1, 5 5-5 98 2 4 6 8 1 12 14 16 18-5 Source: Norges Bank Investment Management 11
28 billion kroner in cash flow in 217 Annual. Billions of kroner 25 25 2 15 2 15 Unlisted real estate Fixed income 1 5 1 5 Equity - 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 - Source: Norges Bank Investment Management 12
Cash flow make up 2.4 percent of fund value Billions of kroner (left axis) and percent of fund (right axis) 25 4.5 2 15 1 4 3.5 3 2.5 2 1.5 Unlisted real estate Fixed income Equity 5 1.5 Share of fund value 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 Source: Norges Bank Investment Management 13
Positive relative return Annual relative return of the fund. Percentage points 5 5 4 4 3 3 2 1.7 % 2 1 Annual relative return.28 % -1-2 -3 4Q 217.17 % 217.7 % Past 1 years.15 % -1-2 -3 Accumulated annualised relative return -4 Since 1998.28 % -4-5 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17-5 Source: Norges Bank Investment Management 14
Positive contribution from all strategies in 217 Contribution. Percentage points Strategy 217 Last five years Fund allocation.22 -.7 Security selection.4.14 Asset management.8.22 Total.7.29 Source: Norges Bank Investment Management 15
We have to expect large value fluctuations Expected volatility. Billion kroner (left axis) and percent (right axis) 1 9 92 2 18 8 78 8 16 7 6 5 1.4 1.6 1.8 14 12 1 Risk measued in kroner 4 3 8 6 Risk measured in percent 2 4 1 2 31 Dec 15 31 Dec 16 31 Dec 17 Source: Norges Bank Investment Management 16
We have to expect even large value fluctuations Billion kroner (left axis) and percent (right axis) 1 92 5 8 4 6 3 Risk measured in kroner (left axis) 4 2 1.8 2 1 Risk measured in percent (right axis) 3 5 7 9 11 13 15 17 Source: Norges Bank Investment Management 17
FINANCIAL MARKETS IN 217 18
Equity markets in 217 Measured in USD (Stoxx in EUR). Indexed (31.12.216 = 1) 14 14 135 13 125 12 FTSE Global All Cap (global) S&P 5 (USA) Stoxx Europe 6 (Europe, EUR) Stoxx Europe 6 (Europe, USD) MSCI Asia Pacific (Asia) 4Q 217 5.9% 6.6%.6% 2.5% 8.2% 217 24.3% 21.8% 11.2% 26.7% 32.% 135 13 125 12 FTSE Global All Cap (global) Stoxx Europe 6 (Europe, EUR) 115 11 15 115 11 15 MSCI Asia Pacific (Asia) S&P 5 (USA) 1 95 1 95 Stoxx Europe 6 (Europe, USD) 9 9 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Source: Bloomberg 19
Emerging equity markets in 217 Measured in USD. Indexed total return (31.12.216 = 1) 14 13 FTSE All Cap FTSE EM 4Q 217 5.9% 7.% 217 24.3% 32.4% 14 13 12 12 FTSE All Cap 11 11 FTSE EM 1 1 9 9 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Source: Bloomberg 2
Emerging equity markets last 5 years Measured in USD. Indexed total return (31.12.212 = 1) 22 2 18 Last 5 years (annualised) FTSE All Cap FTSE EM 11.5% 4.4% 217 24.3% 32.4% 22 2 18 16 14 12 16 14 12 FTSE All Cap FTSE EM 1 1 8 8 6 6 des. 12 des. 13 des. 14 des. 15 des. 16 des. 17 Kilde: Bloomberg 21
Different stock sectors in 217 Measured in USD. Indexed total return (31.12.216 = 1) 15 Technology Basic materials Industrials Telecom Oil and gas 15 14 13 4Q 217 8.9% 8.3% 5.5% 1.9% 6.8% 217 39.3% 31.4% 28.2% 7.9% 6.4% 14 13 Basic materials 12 12 Industrials 11 11 Telecom Technology 1 1 Oil and gas 9 9 8 8 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Source: FTSE 22
Different stock sectors 213 to 217 Measured in USD. Indexed total return (31.12.212 = 1) 275 Technology Basic materials Industrials Health care Oil and gas 275 25 225 217 39.3% 31.4% 28.2% 22.7% 6.4% 5 years (annualised) 19.5% 4.4% 13.4% 15.1%.9% 25 225 Basic materials 2 175 15 2 175 15 Industrials Health care 125 125 Technology 1 1 Oil and gas 75 75 5 5 212 213 214 215 216 217 Source: FTSE 23
Negative real interest rates Inflation-linked government bonds. 1 years to maturity. Percent 1.5 1. US Germany UK 31.12.217.42-1.8-1.86 3.6.217.56 -.74-1.8 31.12.216.47-1.14-1.93 1.5 1..5. -.5.5. -.5 USA Germany -1. -1.5-1. -1.5 United Kingdom -2. -2. -2.5-2.5 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Source: Bloomberg 24
Still large holdings with negative rates Percent of fixed-income investments 25% 25% 2% 2% 15% 15% 1% 1% 5% 5% % % Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Source: Norges Bank Investment Management 25
Currency markets in 217 Measured against USD. Indexed (31.12.216 = 1)* 12 12 115 11 115 11 EUR 15 15 GBP 1 1 JPY 95 EUR GBP JPY 4Q 217 1.6%.8% -.1% 217 13.8% 9.5% 3.5% 9 9 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 95 * Declining curve indicates weaker exchange rate against USD Source: WM Reuters 26
Currency markets in 217 Emerging markets. Measured against USD. Indexed (31.12.216 = 1)* 13 BRL RUB MXN CNY TRY 13 4Q 217-4.6%.% -7.2% 2.% -6.2% 12 217-1.9% 6.% 5.3% 6.7% -7.2% 12 Brazil Russia 11 11 Mexico 1 1 China Turkey 9 9 8 8 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 * Declining curve indicates weaker exchange rate against USD Source: WM Reuters 27
Unlisted real estate investments Billions of kroner 25 25 219 2 181 191 2 15 15 New investments 18 1 5 52 38 44 1 5 Total market value at year end 19 19 15 213 214 215 216 217 Source: Norges Bank Investment Management 28
New real estate investments in 217 Five largest Location Share (percent) Transaction amount (local currency) Transaction amount (NOK) Five properties in Omotesando, Tokyo 7. JPY 92.8 billion 6.8 billion 6-8 boulevard Haussmann, Paris 1. EUR 462.2 billion 4.3 billion Schützenstrasse 26, Berlin 1. EUR 425. billion 4. billion 375 Hudson Street, New York 48. USD 223. billion 1.8 billion 111 New York Avenue NW, Washington, D.C. 49. USD 19.8 billion 1.6 billion 29
New real estate investments in 217 1 Piccadilly, London 263-269 Oxford Street, 1 to 4 Princes Street, London 9 16th Street, NW, Washington, D.C. 111 New York Avenue, NW, Washington, D.C. Schützenstrasse 26, Berlin 6-8 boulevard Haussmann, Paris 375 Hudson Street, New York 2 Air Street, London 5-3-2 Minami- Aoyama, Minato, Tokyo 6-31-17 Jingumae, Shibuya, Tokyo 5-3-27 Minami- Aoyama, Minato, Tokyo 6-12-18 Jingumae, Shibuya, Tokyo 1-8-1 Jingumae, Shibuya, Tokyo
Responsible investment 217 31
Stable internal management costs Management costs. Basis points 16 16 14 14 12 12 Management costs 1 1 8 8 Internal management costs 6 4 6. 3.9 3.3 6 4 Internal management costs, excl. unlisted real estate 2 2 3 5 7 9 11 13 15 17 Source: Norges Bank Investment Management 32
Five new members of the fund s leader groups Per Løken Chief Investment Officer US NBREM Romain Veber Chief Investment Officer Europe NBREM Hege Gjerde Chief Financial Officer NBIM Sirine Fodstad Chief HR Officer NBIM Carine Smith Ihenacho Chief Corporate Governance Officer NBIM 33
New publications in 217 34
Published on website 27 February 218 www.nbim.no Holding lists GIPS report Monthly returns Main external service providers Overview of external managers Detailed tables on return and risk Approved issuers of government bonds 35
Comprehensive reporting Press conference annual report 217 27 February 218 Additional information on responsible investment 217 13 February 218 Additional information on return and risk 217 6 March 218 Additional information on real estate investments 217 13 Mars 218 36
Public information available on our website www.nbim.no Submissions to the Ministry of Finance Investment advice Discussion notes Analyses that may form the basis for the fund s investment strategy and advice to the Ministry of Finance Asset manager perspectives The fund s views and reflections on issues topical for the financial industry Expectations documents The fund s expectations to companies regarding specific focus areas Position papers The fund s position on specific ownership topics Public reports 37
Highlights The return was 13.7 percent in 217 Equity 19.4 percent Fixed income 3.3 percent Unlisted real estate 7.5 percent The return on the fund was 1,28 billion kroner The return on equity and fixed-income investments was.7 percentage point higher than the return on the benchmark index The market value of the fund grew to 8,488 billion kroner Asset allocation at the end of the year: Equity 66.6 percent Fixed income 3.8 percent Unlisted real estate 2.6 percent 38
GOVERNMENT PENSION FUND GLOBAL ANNUAL REPORT 217