Government Pension Fund Global Second quarter 2019 Oslo, 21 - PowerPoint PPT Presentation

Government Pension Fund Global Second quarter 2019 Oslo, 21 August 2019

Highlights ▪ The market value of the fund increased by 224 billion kroner to 9,162 billion kroner ▪ The fund returned 3.0 percent in the second quarter of 2019 ▪ The return on the fund was 0.19 percentage point lower than the return on the reference index ▪ At the end of the quarter, the fund was invested as follows: • Equity investments 69.3 percent • Unlisted real estate investments 2.7 percent • Fixed-income investments 28.0 percent 2

Market value increased to 9,162 billion kroner Billions of kroner. As at 30.06.2019 10,000 10,000 Value Percentage share 9,000 9,000 Equity investments 6,348 69.3 Unlisted real estate investments 247 2.7 8,000 8,000 Fixed-income investments 2,567 28.0 Fixed income Fund 9,162 100 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 3 Source: Norges Bank Investment Management

256 billion kroner in return Billions of kroner 750 750 500 500 250 250 Return 0 0 Inflow/withdrawal Q2 2019 -250 -250 Return 256 Inflow 6 -500 -500 -750 -750 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 4 Source: Norges Bank Investment Management

256 billion kroner in return Billions of kroner 750 750 500 500 250 250 Krone rate Return 0 0 Inflow/withdrawal Q2 2019 Total -250 -250 Return 256 Inflow 6 Krone rate -38 -500 -500 Total 224 -750 -750 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 5 Source: Norges Bank Investment Management

3.0 percent quarterly return Measured in the fund’s currency basket. Quarterly return. Percent 15 15 10 10 5 5 3.0 0 0 -5 -5 -10 -10 -15 -15 09 10 11 11 12 13 14 14 15 16 17 17 18 19 6 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 Q2 2019 -5 -5 Equity investments 15.6 % 3.0 % Fixed-income investments Unlisted real estate investments 2.5 % 0.8 % -10 -10 Fixed-income investments 6.0 % 3.1 % -15 -15 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 7 Source: Norges Bank Investment Management

Fund’s relative return Quarterly return relative to reference index. Percentage points 2.5 2.0 2.0 1.5 1.5 1.0 1.0 0.5 0.5 0.0 0.0 -0.19 -0.5 -0.5 -1.0 -1.0 -1.5 -1.5 -2.0 -2.0 09 10 11 12 13 14 15 16 17 18 19 8 Equity and fixed-income investments until end of 2016. Source: Norges Bank Investment Management

Changes in value since 1996 Billions of kroner 30.06.2019 31.03.2019 31.12.2018 Total inflow of capital* 3,382 3,376 3,371 Total return on fund 4,660 4,404 3,666 Total management fees -46 -45 -44 Changes due to fluctuations in krone 1,165 1,203 1,263 Market value of the fund 9,162 8,938 8,256 *Total inflow of capital is adjusted for accrued, not paid, management fees. 9 Source: Norges Bank Investment Management

Key figures per second quarter Measured in the fund’s currency basket. Annualised. Percent Since 1.1.1998 Last 10 years Return on fund 5.91 8.83 Annual inflation 1.79 1.73 Annual management costs 0.08 0.07 Annual net real return on fund 3.97 6.91 10 Source: Norges Bank Investment Management

Developments in equity sectors Measured in USD. Indexed total return (31.12.2018 = 100) 140 140 Technology Industrials Financials Oil and gas Health care Q2 2019 3.7% 5.2% 5.2% -1.3% 1.2% Year-to-date 22.5% 21.2% 15.9% 13.2% 9.9% 130 130 Technology Industrials 120 120 Financials Oil & gas 110 110 Health care 100 100 90 90 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 11 Source: FTSE Russell

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) 140 140 Equity part of the fund’s FTSE Global Stoxx MSCI Asia All Cap index* benchmark index S&P 500 Europe 600 Pacific FTSE Global All Cap index* Q2 2019 3.1% 3.2% 4.3% 3.4% 0.9% 130 130 Year-to-date 16.2% 15.5% 18.5% 17.1% 10.7% Equity part of the fund's reference index 120 120 S&P 500 (US) 110 110 Stoxx Europe 600 (Europe) MSCI Asia Pacific (Asia) 100 100 90 90 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 * Excluding Norway 12 Source: Bloomberg

10-year government bond yields Percent 4.0 4.0 3.5 3.5 3.0 3.0 Germany US 2.5 2.5 Japan 2.0 2.0 UK 1.5 1.5 Spain 1.0 1.0 Italy 0.5 0.5 0.0 0.0 -0.5 -0.5 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 13 Source: Bloomberg

Large holdings with negative yield Percent of fixed-income investments 25 25 20 20 15 15 10 10 5 5 0 0 Dec-14 Sep-15 Jun-16 Mar-17 Dec-17 Sep-18 Jun-19 14

10-year government bond yields Percent 22 22 20 20 18 18 Turkey 16 16 Brazil 14 14 South Africa 12 12 Indonesia 10 10 Mexico 8 8 6 6 4 4 2 2 0 0 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 15 Source: Bloomberg

Real estate acquisitions and disposals Announced in the second quarter of 2019. Unlisted real estate ACQUISITIONS Location Sector Purchase price Share Extended partnership 12 assets in Hudson Office 831 million kroner 48 percent Square-area, New York, US Logistics properties in US/ Spain and the Logistics 1.2 billion kroner 45/50 percent Netherlands DISPOSALS Location Sector Sale price Share «Die Welle» in An der Welle, Frankfurt, Germany Office 3.0 billion kroner 50 percent 16

Peak season for voting ▪ The second quarter accounts for around two-thirds of our voting in a year • Voted at 6,918 meetings • Evaluated and voted at 81,237 proposals ▪ We published three voting intentions during the quarter • Voting at board members on regular intervals • Board candidates for voting should be made public • Reporting on water management 17

Observation and exclusions Announced in first half 2019 ▪ June: Revokal of exclusion of seven companies ▪ March: Exclusion of one company ▪ January: Exclusion of three companies 18

Highlights ▪ The market value of the fund increased by 224 billion kroner to 9,162 billion kroner ▪ The fund returned 3.0 percent in the second quarter of 2019 ▪ The return on the fund was 0.19 percentage point lower than the return on the reference index ▪ At the end of the quarter, the fund was invested as follows: • Equity investments 69.3 percent • Unlisted real estate investments 2.7 percent • Fixed-income investments 28.0 percent 19

Government Pension Fund Global Second quarter 2019 Oslo, 21 August 2019