Perspectives on managing the
Government Pension Fund Global
Svein Gjedrem, Governor of Norges Bank 2 November 2010
www.norges-bank.no
1969
“The role of petroleum activity
in Norwegian society”
discovered Oil Norwegian on continental
shelf
1996
1974 1983 1990 2001
Act on the Government Petroleum Fund Committee on the
Future of Petroleum Activity
First transfer to Government Petroleum Fund
Fiscal rule
Timeline for managing Norway’s oil wealth
1996
Begins to invest in
equities (40%
allocation)
2007
1998 2000 2002 2010
Corporate bonds and mortgage- backed securities Five emerging
markets First
transfer
Equity allocation raised to 60%.
Small-cap companies
Timeline for the Government Pension Fund Global
Mandate for real
estate
2005 Inflation-
linked bonds
Return on the Fund
Return on the Fund. As at 2010 Q3. Per cent
-25 -20 -15 -10 -5 0 5 10 15 20 25
1998 2002 2006 2010
-25 -20 -15 -10 -5 0 5 10 15 20 25
Annual rate of return
Annualised cumulative return
0,0 0,5 1,0 1,5 2,0
Europe
Americas
Asia and
Oceania
Total
Ownership interests in equity markets
Percentage of FTSE market cap
0 2 4 6 8 10 12 14
jan. 08 apr. 08 jul. 08 okt. 08 jan. 09 apr. 09 jul. 09 okt. 09 jan. 10 apr. 10 jul. 10
Equity
5y5y German bonds swap
Source: Thomson Reuters and Bank of England
Future returns
Expected nominal rate of return on German 5-year government bonds 5 years ahead and equity instruments. Per cent
Excess return
2010 as of Q3. Per cent
-2 -1.5 -1 -0.5 0 0.5 1 1.5 2 2.5
-2 -1.5 -1 -0.5 0 0.5 1 1.5 2 2.5
Annual excess return
Annual cumulative excess return
Investment strategy
EQUIT Y
NOMINAL RATES
Currency allocation
Strategic asset allocation
Rebalancing
Investment mandate
Investment universe
BENCHMARK
REAL RETURN EQUITY
Peterson Institute:
“Sovereign wealth funds (SWFs), large pools of government-owned funds that are invested in whole or in part outside their home country, burst upon the policy consciousness only
three years ago.”
Motives for assessing transparency of SWFs
Peterson Institute:
“Their explosive growth up until 2007 fanned widespread anxieties about shifts of global economic wealth and the roles of
governments in managing that wealth. On the other hand, SWF investments helped some major Western financial institutions weather the recent financial crisis.”
Motives for assessing transparency of SWFs
(cont.)
Fund (origin) Points 2009 (per cent)
Change from 2008 (percentage
points)
Government Pension Fund Global (Norway) 97 5
CalPERS (California) 95 8
Alaska Permanent Fund 92 0
ABP (Netherlands) 85 5
Timor-Leste 85 5
GIC (Singapore) 65 24
Abu Dhabi Investment Authority 11 3
Transparency of SWFs
Source: Edward Truman
Real exchange rate
Deviation from mean over the period 1970 – 2009. Per cent. 1970 – 20101)
-20 -15 -10 -5 0 5 10 15 20 25
-20 -15 -10 -5 0 5 10 15 20 25
1970 1975 1980 1985 1990 1995 2000 2005 2010
Relative wages
Relative consumer prices
Oil revenue spending
Oil discovery
1)The squares show the average so far in 2010 (to 21 October).
A rising curve denotes weaker competitiveness.
Sources: Statistics Norway. Technical Reporting Committee on Income Settlements, Ministry of Finance and Norges Bank
