Long-term management in volatile financial markets
Historical archive
Published under: Solberg's Government
Publisher: Ministry of Finance
Press release | No: 15/2019 | Date: 05/04/2019
– 2018 was a challenging year with weak performance for both funds. Such periods clearly illustrate how important it is to have broad endorsement, a long-term perspective and a thorough understanding of the risk assumed in the management of our joint savings. Financial markets fluctuate, but the management should be stable, says Siv Jensen, Minister of Finance.
The Government is today submitting the Government Pension Fund 2019 report to the Storting. This report presents the investment strategies and the performance achieved in the management of the Government Pension Fund Global (GPFG) and the Government Pension Fund Norway (GPFN). It also discusses further development of the investment strategies and the work on responsible management.
Performance of the Government Pension Fund in 2018
The GPFG registered a return of -6.1 percent in 2018, whilst the GPFN registered a return of -0.4 percent.
The value of the GPFG and the GPFN was NOK 8,251 billion and NOK 239 billion, respectively, at the end of 2018.
– Last year was characterised by volatile financial markets and weak performance. The return on the GPFG in 2018 was the second-weakest in the history of the fund. However, this was by no means an extraordinary year in the financial markets. History has repeatedly reminded us that we need to be prepared for large and sudden market fluctuations, says Siv Jensen, Minister of Finance.
Review of Folketrygdfondet’s management of the GPFN
The Ministry of Finance reviews the management of the two funds on a regular basis. Key issues for such reviews are whether favourable asset management performance has been achieved over time and whether the limit on deviations from the benchmark index should be changed.
The review of the management of the GPFN presented in the report shows that the performance achieved by Folketrygdfondet over time is favourable. In 2018, the GPFN outperformed the benchmark index by 0.8 percentage points, and the annual average excess return since 2007 has been 1.0 percentage point.
In order to ensure that the benchmark is tracked in a cost-effective manner and in order to achieve excess return over time, the management of the GPFN may deviate somewhat from the benchmark. The Ministry of Finance has stipulated a limit allowing a deviation of up to 3 percentage points from the benchmark. No change is proposed to this limit.
– There is every reason to be satisfied with the performance achieved by Folketrygdfondet over time. The excess return since 2007 has been robust and costs are low, says the Minister of Finance.
Key figures for the Government Pension Fund
|
|
GPFG |
GPFN |
|
Value at yearend 2018 |
|
|
|
Market value |
NOK 8,251 billion |
NOK 239 billion |
|
Equity share |
66.3 percent |
59.0 percent |
|
Fixed income share |
30.7 percent |
41.0 percent |
|
Unlisted real estate share |
3.0 percent |
- |
|
|
|
|
|
Performance 2018 |
|
|
|
Total return |
-6.1 percent |
-0.4 percent |
|
Equity return |
-9.5 percent |
-1.8 percent |
|
Fixed income return |
0.6 percent |
1.7 percent |
|
Unlisted real estate return |
7.5 percent |
- |
|
Total excess return |
-0.3 percent |
0.8 percent |
|
Costs as a share of assets |
0.05 percent |
0.06 percent |
|
Costs in NOK |
NOK 4,544 million |
NOK 159 million |
|
|
|
|
|
Real rate of return over the last 20 years |
3.3 percent |
5.3 percent |
|
|
|
|
|
Risk at yearend 2018 |
|
|
|
Expected relative volatility |
0.3 percentage points |
0.4 percentage points |
|
Expected absolute volatility in NOK |
NOK 710 billion |
NOK 15 billion |