THE EQUITY SHARE IN THE GOVERNMENT PENSION FUND GLOBAL
DEPUTY GOVERNOR EGIL MATSEN
The Government Pension Fund Global
2
At the start of the year. NOK bn
Sources: Ministry of Finance and Norges Bank
0 2000 4000 6000 8000
0 2000 4000 6000 8000
1998 2004 2010 2016
Equity share in the strategic benchmark index and of the fund
3
In percent of total fund value
0 10 20 30 40 50 60 70
0 10 20 30 40 50 60 70
1996 2000 2004 2008 2012 2016
Of the fund Of the strategic benchmark
Source: Norges Bank
Yield and future returns
4
Yield six years earlier and return on a bond portfolio the next six years. Percent
Sources: Gurkaynak et al. (2006), Barclays and Norges Bank
0 2 4 6 8 10 12 14 16 18
0 2 4 6 8 10 12 14 16 18
1967 1975 1983 1991 1999 2007 2015
Return next six years Yield six years earlier
Yields on US inflation-linked bonds
5
Percent
-2 -1 0 1 2 3 4 5
-2 -1 0 1 2 3 4 5
1997 2000 2003 2006 2009 2012 2015
Source: Reuters
Driving forces behind the fall in the global real interest rate
6 Global real interest rate
Global saving and investment
Global investment Global saving
r*
Fall in investment
Lower growth prospects Relative price of capital Increased uncertainty
Increased saving in emerging economies and oil-producing countries
Demographic trends Greater income inequality Deleveraging
Increased uncertainty
Realised real return on equity and fixed income
7
Cumulative return in international markets. Log scale
0 1 10 100 1000
0 1 10 100 1000
1899 1909 1919 1929 1939 1949 1959 1969 1979 1989 1999 2009
Equity Bonds Bills
Source: Dimson, Marsh and Staunton (2016)
Equity premium from different model specifications
8
Shaded area indicates the width between 9 different specifications.
Percent
Source: NBIM Discussion Note 1/2016: The Equity Risk Premium
-4 -2 0 2 4 6 8 10 12 14 16
-4 -2 0 2 4 6 8 10 12 14 16
1995 1999 2003 2007 2011 2015
Growth and returns
9
Real return in international equity markets in periods with high, medium and low growth in the global economy. Percent
Sources: Dimson et al. (2016), Reinhardt and Rogoff (2011) and Feenstra et al. (2015)
0 2 4 6 8 10 12
0 2 4 6 8 10 12
Real return GDP growth Real return GDP growth
5 years 10 years
High growth Medium growth Low growth
Equity allocation and expected return
10
Percent
0 1 2 3 4
0 1 2 3 4
0 10 20 30 40 50 60 70 80 90 100
Source: Norges Bank
Equity allocation and fluctuations
11
Portfolio risk. Percent
0 5 10 15 20
0 5 10 15 20
0 10 20 30 40 50 60 70 80 90 100
Correlation = 1 Correlation = 0.4 Correlation = - 0.3
Correlation between equities and bonds
12
24-month rolling equity and bond correlation coefficient for US market data
-100 -75 -50 -25 0 25 50 75 100
-100 -75 -50 -25 0 25 50 75 100
1963 1971 1979 1987 1995 2003 2011
Correlation
Average 1980-2000 Average 2000-2015
Source: Norges Bank
The government’s petroleum wealth
13
Share of total petroleum wealth. Percent
Source: Ministry of Finance
0 10 20 30 40 50 60 70 80 90 100
0 10 20 30 40 50 60 70 80 90 100
1998 2002 2006 2010 2014
Fund Petroleum reserves
Petroleum revenue spending
Non-oil deficit. Percent
0 5 10 15 20 25
0 5 10 15 20 25
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Share of government expenditures Share of fund value
Sources: Ministry of Finance and Norges Bank
