Article | Last updated: 2018-04-10 | Ministry of Finance
The investment strategy of the Government Pension Fund is premised on seeking to maximise the return on fund assets within a moderate level of risk. The strategy is based on assessments of expected return and risk in the long run and is derived from the purpose and distinctive characteristics of the Fund, comparative advantages of the asset manager, as well as assumptions regarding the functioning of the financial markets.The Ministry has attached considerable weight to anchoring the investment strategy in financial theory, research and accumulated experience.
The investment strategy is expressed through the composition of the Fund’s strategic benchmark indices for equities and fixed income, cf. figure above. The capital of the GPFG is in its entirety invested abroad in foreign currency, whereas the main portion of the assets of the GPFN is invested in the Norwegian equity and fixed income markets. In this regard, there are distinctive differences between the two funds: the GPFN is a relatively large investor in a small capital market, while the GPFG is, in relative terms, a minor investor in large, international markets.
One must be prepared for significant variations in the value of the Government Pension Fund from one year to the next. The Fund is highly resilient to such volatility. One reason for this high risk-bearing capacity is the low probability of large withdrawals on short notice. Consequently, the investment strategy does not aim to minimise short-term fluctuations in the value of the Fund. A strategy with this objective would have produced a significantly lower expected return over time.