Government Pension Fund Global Third quarter 2019 Oslo, 30 - PowerPoint PPT Presentation

Government Pension Fund Global Third quarter 2019 Oslo, 30 October 2019

Market value increased to 9,742 billion kroner Billions of kroner. As at 30.09.2019 10,000 10,000 Value Percentage share 9,000 9,000 Equity investments 6,729 69.1 Unlisted real estate investments 268 2.8 8,000 8,000 Fixed-income investments 2,744 28.2 Fixed income Fund 9,742 100 7,000 7,000 6,000 6,000 Real estate 5,000 5,000 4,000 4,000 Equity 3,000 3,000 2,000 2,000 1,000 1,000 09 10 11 12 13 14 15 16 17 18 19 2 Source: Norges Bank Investment Management

236 billion kroner in return Billions of kroner 750 750 500 500 250 250 Krone rate Return 0 0 Inflow/withdrawal Total -250 -250 YTD Q3 2019 Return 1,231 236 Inflow 4 -5 -500 -500 Krone rate 251 349 Total 1,486 580 -750 -750 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 3 Source: Norges Bank Investment Management

1.6 percent quarterly return Measured in the fund’s currency basket. Quarterly return. Percent 10 10 8 8 6 6 4 4 2 2 1.6 0 0 -2 -2 -4 -4 -6 -6 -8 -8 -10 -10 09 10 11 12 12 13 14 15 15 16 17 18 18 19 4 Source: Norges Bank Investment Management

Strongest return for fixed income Measured in the fund’s currency basket. Percent 15 15 10 10 Equity investments 5 5 0 0 Real estate investments 2019 Q3 2019 -5 -5 Fixed-income investments Equity investments 17.0% 1.3% Unlisted real estate investments 4.1% 1.6% -10 -10 Fixed-income investments 8.5% 2.4% -15 -15 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 5 Source: Norges Bank Investment Management

Fund’s relative return Quarterly return relative to reference index. Percentage points 0.6 0.6 0.5 0.5 0.4 0.4 0.3 0.3 0.2 0.2 0.1 0.1 0.01 0.0 0.0 -0.1 -0.1 -0.2 -0.2 -0.3 -0.3 -0.4 -0.4 -0.5 -0.5 -0.6 -0.6 09 10 11 12 13 14 15 16 17 18 6 Equity and fixed-income investments until end of 2016. Source: Norges Bank Investment Management

Changes in value since 1996 Billions of kroner 30.09.2019 30.06.2019 31.12.2018 Total inflow of capital* 3,378 3,382 3,371 Total return on fund 4,897 4,660 3,666 Total management fees -47 -46 -44 Changes due to fluctuations in krone 1,514 1,165 1,263 Market value of the fund 9,742 9,162 8,256 *Total inflow of capital is adjusted for accrued, not paid, management fees. 7 Source: Norges Bank Investment Management

Key figures per third quarter Measured in the fund’s currency basket. Annualised. Percent Since 1.1.1998 Last 10 years Return on fund 5.92 7.63 Annual inflation 1.78 1.73 Annual management costs 0.08 0.07 Annual net real return on fund 3.99 5.72 8 Source: Norges Bank Investment Management

Developments in equity markets Measured in the fund’s currency basket (S&P 500 and MSCI Asia Pacific in USD, Stoxx Europe 600 in EUR). Indexed total return (31.12.2018 = 100) 130 130 FTSE Global All Cap index* 120 120 Equity part of the fund's benchmark index 110 110 S&P 500 (US) 100 100 Stoxx Europe 600 (Europe) MSCI Asia Pacific (Asia) Equity part of the fund’s FTSE Global All Stoxx MSCI Asia 90 90 Cap index* benchmark index S&P 500 Europe 600 Pacific Q3 2019 1.8% 1.2% 1.7% 2.7% -13% Year-to-date 18.2% 16.8% 20.6% 20.3% 9.2% 80 80 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 * Excluding Norway 9 Source: Bloomberg

10-year government bond yields Percent 4.0 4.0 US Italy UK Spain Japan Germany 3.5 3.5 30.09.2019 1.66% 0.82% 0.48% 0.14% -0.22% -0.57% 31.12.2018 2.68% 2.74% 1.28% 1.41% -0.01% 0.24% 3.0 3.0 US 2.5 2.5 Italy 2.0 2.0 UK 1.5 1.5 Spain 1.0 1.0 Japan 0.5 0.5 Germany 0.0 0.0 -0.5 -0.5 -1.0 -1.0 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 10 Source: Bloomberg

Highlights ▪ The market value of the fund increased by 580 billion kroner to 9,742 billion kroner ▪ The fund returned 1.6 percent in the third quarter of 2019 ▪ The return on the fund was 0.01 percentage point higher than the return on the benchmark index ▪ At the end of the quarter, the fund was invested as follows: • Equity investments 69.1 percent • Unlisted real estate investments 2.8 percent • Fixed-income investments 28.2 percent 11

Fund value and GDP Market value in percent of GDP and mainland GDP. As at 30.09.2019 350 350 300 300 250 250 Percent of mainland GDP 200 200 150 150 Percent of GDP 100 100 50 50 0 0 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 13 Source: Norges Bank Investment Management, Statistics Norway, Ministry of Finance GDP for third quarter 2019 is an estimate based on numbers from the national budget 2020

Household wealth and value of the fund 14,000 14,000 12,000 12,000 10,000 10,000 Gross wealth 8,000 8,000 Net wealth 6,000 6,000 Value of the fund 4,000 4,000 2,000 2,000 0 0 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 14 Source: Norges Bank, Norges Bank Investment Management

The fund larger than petroleum wealth Billions of kroner* 10,000 10,000 8,000 8,000 Government share 6,000 6,000 of remaining petroleum wealth 4,000 4,000 Value of the fund 2,000 2,000 0 0 2009 2019 15 Source: Ministry of Finance, Norges Bank Investment Management * Petroleum wealth is measured in 2020-kroner, while the value of the fund is measured in current value as at 30.09.2019

Fund cash flow larger than petroleum income 450 450 400 400 350 350 300 300 Government net 250 250 petroleum income 200 200 Fund cash flow 150 150 100 100 50 50 0 0 97 99 01 03 05 07 09 11 13 15 17 19 21 16 Source: Statistics Norway, Ministry of Finance (National budget 2020), Norges Bank Investment Management (Accounts) Numbers for 2019 and 2020 are estimates from the national budget.

Income and savings Billions of 2020-kroner 1,500 1,500 1,000 1,000 Gov net cash flow Transfers to the fund 500 500 0 0 -500 -500 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019 17 Source: Ministry of Finance, National budget 2020

Income, savings and return Billions of 2020-kroner 1,500 1,500 1,000 1,000 Gov net cash flow Transfers to the fund 500 500 Fund real return 0 0 -500 -500 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019 18 Source: Finansdepartementet, Nasjonalbudsjettet 2020

5,026 billions of kroner in return Accumulated value of return as at 25.10.2019. Billions of kroner 6,000 6,000 5,000 5,000 4,000 4,000 3,000 3,000 2,000 2,000 1,000 1,000 0 0 -1,000 -1,000 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 19 Source: Norges Bank Investment Management

The Norwegian oil economy Billions of 2020-kroner. Accumulated 10,000 Production costs 8,000 Real return Petroleum income spent Gov 6,000 Pension Fund Real return Global 4,000 Net Inflow to the fund inflow to 2,000 Gov net the fund petroleum income 0 Petroleum Petroleum sales -2,000 income spent -4,000 Production -6,000 costs, etc. -8,000 -10,000 -12,000 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 20 Source: Statistics Norway, Ministry of Finance, Norges Bank Investment Management

Real return exceeds spending Billions of 2020-kroner. Accumulated 6,000 6,000 5,000 5,000 4,000 4,000 Petroleum income spent 3,000 3,000 Fund real return 2,000 2,000 1,000 1,000 0 0 -1,000 -1,000 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 Source: Statistics Norway, Ministry of Finance, Norges Bank Investment Management

Strategy 2020-2022 Norges Bank Investment Management

Strategy Plan 2020-22 Four chapters Fund strategy ▪ Complement the fund’s investments in equities and fixed income by investing in real estate and renewable energy infrastructure Ownership strategy ▪ Exercise our ownership role to safeguard the fund’s long -term economic interests Investment strategies ▪ Utilise a set of diversified investment strategies in a risk-controlled and low-cost manner Management strategy ▪ Foster a global, performance-oriented and efficient investment organisation 23

Strategy Plan 2020-22 Fund strategy We manage a global portfolio dominated by public market equity risk. We will develop alternative risk measures for the fund. There are investment opportunities that cannot be defined through an index. The reference portfolio serves as a starting point for our investment strategies. 24

Strategy Plan 2020-22 Fund strategy We target a real estate portfolio, made up of both listed and unlisted assets, of 5 percent of the fund. We target a portfolio of renewable energy investments of around 1 percent of the fund towards the end of this strategy period. 25

Strategy Plan 2020-22 Ownership strategy We focus on corporate governance issues and areas of long-term financial relevance. We take a principle-based approach and are transparent about our activities. 26

Strategy Plan 2020-22 Ownership strategy We will contribute to the strengthening and further alignment of corporate sustainability reporting standards across markets. By the end of the strategy period, we aim to publish all our voting instructions ahead of shareholder meetings where this is practicable. 27