Retu eturn and risk 2 n and risk 2019 019 Government Pension Fund - - PowerPoint PPT Presentation

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Retu eturn and risk 2 n and risk 2019 019 Government Pension Fund - - PowerPoint PPT Presentation

Jan 11, 2023 209 likes •475 views

Retu eturn and risk 2 n and risk 2019 019 Government Pension Fund Global Yngve Slyngstad, Chief Executive Officer, Norges Bank Investment Management Dag Huse, Chief Risk Officer, Norges Bank Investment Management Press conference, 26 March

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SLIDE 1

Retu eturn and risk 2 n and risk 2019 019

Government Pension Fund Global

Press conference, 26 March 2020 Yngve Slyngstad, Chief Executive Officer, Norges Bank Investment Management Dag Huse, Chief Risk Officer, Norges Bank Investment Management

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SLIDE 2

Annual publication on return and risk

Published on our website www.nbim.no. English version only

2

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SLIDE 3

10,127 billion kroner in the fund

Market value as at 25.03.2020. Billions of kroner

3 2 000 4 000 6 000 8 000 10 000 12 000 2 000 4 000 6 000 8 000 10 000 12 000 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Fixed income Unlisted real estate Equity

10,127

Value Percentage share Equity investments 6,610 65.3 Unlisted real estate investments 327 3.2 Fixed-income investments 3,190 31.5

3

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SLIDE 4

Return

4

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SLIDE 5

Absolute return – key figures

  • Return. Table 20. Annualised. Percent

5

Since 01.01.1998 Last 10 years Last 5 years 2019 Return on equity investments1 6.21 9.84 8.99 26.02 Return on fixed-income investments 4.69 4.05 3.18 7.56 Return on unlisted real estate investments2

  • 6.49

6.84 Return on fund 6.09 7.83 7.05 19.95 2020 YTD

  • 22.82
  • 0.06

0.40

  • 16.17

1 Since 01.01.1999. 2 Includes listed real estate investments from 1 November 2014 to the end of 2016.

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SLIDE 6
  • 1 500
  • 1 250
  • 1 000
  • 750
  • 500
  • 250

250 500 750 1 000 1 250 1 500

  • 1 500
  • 1 250
  • 1 000
  • 750
  • 500
  • 250

250 500 750 1 000 1 250 1 500 Q1 2019 Q2 2019 Q3 2019 Q4 2019 1Q 2020*

Krone rate Return Inflow/withdrawal Total

  • 1,330 billion kroner in return

Billions of kroner. As at 25.03.2020

6

Source: Norges Bank Investment Management 2019 2020 YTD 25.03.2020 Return 1,692

  • 1,330

Inflow 13 Krone rate 127 1,381 Total 1,832

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SLIDE 7

Equity exposure

  • Risk. Chart 21. Percent

7

30 35 40 45 50 55 60 65 70 75 30 35 40 45 50 55 60 65 70 75 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

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SLIDE 8

Equity markets

Measured in USD (Stoxx in EUR). As at 25.03.2020 Indexed total return. 31.12.2018 = 100

8 80 90 100 110 120 130 140 80 90 100 110 120 130 140 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20

FTSE Global All Cap (global) S&P 500 (US) Stoxx Europe 600 (Europe) MSCI Asia Pacific (Asia)

FTSE Global All Cap S&P 500 Stoxx Europe 600 MSCI Asia Pacific 2019 27.1% 31.5% 27.7% 19.9% 2020

  • 24.9%
  • 23.0%
  • 24.2%
  • 20.9%

Source: Bloomberg

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SLIDE 9

Number of days from peak to bear market (-20%)

S&P500

9 451 445 426 353 320 274 201 167 55 42 22 November 1980 August 1956 November 1968 March 2000 January 1973 October 2007 February 1966 December 1961 August 1987 September 1929 February 2020

Source: Bloomberg

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SLIDE 10

Number of days from peak to -30%

S&P500

10 542 540 531 363 55 43 30 March 2000 January 1973 November 1968 October 2007 August 1987 September 1929 February 2020

Source: Bloomberg

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SLIDE 11

36-month correlation

  • Risk. Chart 25. 10-year US yield changes vs. S&P 500 price returns

11

  • 1.0
  • 0.8
  • 0.6
  • 0.4
  • 0.2

0.0 0.2 0.4 0.6 0.8 1.0

  • 1.0
  • 0.8
  • 0.6
  • 0.4
  • 0.2

0.0 0.2 0.4 0.6 0.8 1.0 75 80 85 90 95 00 05 10 15

Source: Bloomberg

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SLIDE 12

10-year government bond yields

As at 25.03.2020. Percent

12

  • 1.0
  • 0.5

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

  • 1.0
  • 0.5

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20

US Germany Japan UK Italy

US Germany Japan UK Italy 31.12.2018 2.7% 0.2% 0.0% 1.3% 2.7% 31.12.2019 1.9%

  • 0.2%

0.0% 0.8% 1.4% 25.03.2020 0.9%

  • 0.3%

0.0% 0.4% 1.5% Source: Bloomberg

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SLIDE 13

Rolling return of 70 equity/30 fixed income

  • Risk. Chart 19. 5-year rolling return. Annualised. Measured in dollars. Percent

13

Source: Dimson-Marsh-Staunton Global Return Data

  • 10
  • 5

5 10 15 20 25 30 1900 1920 1940 1960 1980 2000

  • 10
  • 5

5 10 15 20 25 30

Equity contribution 70 equity/30 fixed income

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SLIDE 14

Rolling return of 70 equity/30 fixed income

  • Risk. Chart 20. 10-year rolling return. Annualised. Measured in dollars. Percent

14

Source: Dimson-Marsh-Staunton Global Return Data

  • 5

5 10 15 20 1900 1920 1940 1960 1980 2000

  • 5

5 10 15 20

Equity contribution 70 equity/30 fixed income

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SLIDE 15

The fund's return

Table 24. Measured in various currencies. Annualised. Percent

15

1998-2002 2003-2007 2008-2012 2013-2017 2018-2019 US dollar 3.27 13.09 2.50 7.26 4.92 Euro 1 4.23 5.84 4.65 9.28 8.52 British pound 3.87 8.39 6.74 11.27 6.02 Norwegian kroner 2.15 7.71 3.01 15.84 8.75 Currency basket 3.19 8.92 3.14 9.26 6.12

1 Euro was introduced as currency on 01.01.1999. WM/Reuters' Euro rate is used as estimate for 31.12.1997.

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SLIDE 16

Absolute return – five year buckets

  • Return. Table 21. Annualised. Percent.

16

1998-2002 2003-2007 2008-2012 2013-2017 2018-2019 Return on equity investments1

  • 4.85

16.28

  • 0.59

12.94 6.80 Return on fixed-income investments 6.26 4.00 5.87 2.96 4.00 Return on unlisted real estate investments2 8.03 7.18 Return on fund 3.19 8.92 3.14 9.26 6.12

1 Since 01.01.1999. 2 Includes listed real estate investments from 1 November 2014 to the end of 2016.

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SLIDE 17

Risk

17

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SLIDE 18

The fund’s expected absolute volatility

  • Risk. Chart 29. Percent

18

5 10 15 20 25 30 5 10 15 20 25 30 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Source: Norges Bank Investment Management

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SLIDE 19

Recent and past stressed years

  • Risk. Chart 22. Asset class returns. Measured in dollars. Percent

19

  • 50
  • 40
  • 30
  • 20
  • 10

10 20 30

  • 50
  • 40
  • 30
  • 20
  • 10

10 20 30 1920 1931 2002 2008

Equity Fixed income

Source: Dimson-Marsh-Staunton Global Return Data

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SLIDE 20

Fund performance in 2008

  • Risk. Chart 23. Percent

20

  • 40
  • 30
  • 20
  • 10

10 20 30 40

  • 40
  • 30
  • 20
  • 10

10 20 30 40 Fund, USD Fund, Currency basket Fund, NOK NOK/USD NOK/Currency basket

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SLIDE 21

The fund’s expected relative volatility

Relative risk. Chart 31. Basis points

21

20 40 60 80 100 120 140 160 20 40 60 80 100 120 140 160 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Source: Norges Bank Investment Management

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SLIDE 22

Expected relative volatility for asset classes

Relative risk. Chart 32. Basis points

22

Source: Norges Bank Investment Management

20 40 60 80 100 120 140 160 180 200 220 20 40 60 80 100 120 140 160 180 200 220 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Fixed income Equity

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SLIDE 23

The fund’s relative return 5-year buckets

Table 35. Measured in the fund’s currency basket. Annualised.

23 1998- 2002 2003- 2007 2008- 2012 2013- 2017 2018- 2019 Return on fund (percent) 1 3.19 8.92 3.15 9.25 6.12 Return on fund benchmark (percent) 1 2.78 8.52 3.14 8.96 6.19 Relative return on fund (percentage points) 1 0.41 0.40 0.01 0.29

  • 0.07

Return on equity management (percent)

  • 4.85

16.28

  • 0.59

12.95 6.84 Return on equity management benchmark (percent)

  • 5.63

15.37

  • 0.59

12.52 7.04 Relative return on equity management (percentage points) 0.78 0.90 0.01 0.42

  • 0.19

Return on fixed-income management (percent) 6.26 4.00 5.87 2.96 4.00 Return on fixed-income management benchmark (percent) 6.09 3.97 5.44 2.98 3.95 Relative return on fixed-income management (percentage points) 0.17 0.03 0.43

  • 0.02

0.05 Return on real estate management (percent) 6.49 Return on real estate management benchmark (percent) 5.42 Relative return on real estate management (percentage points) 1.08

1 Includes real estate management from 01.01.2017. The fund's relative return prior to 2017 is calculated on equity and fixed-income management only.

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SLIDE 24

24

Cont Contribution ributions to r s to rela elativ tive r e retu eturn 20 n 2019 19

By Strategy. Table 36. Percentage points

Equity management Fixed-income management Real estate management Allocation Total Fund allocation 0.02 0.00

  • 0.16

0.02

  • 0.12

Reference portfolio

  • 0.07
  • 0.01

0.01

  • 0.08
  • f which systematic factors
  • 0.11
  • 0.11

Real estate

  • 0.16
  • 0.16

Unlisted real estate

  • 0.19
  • 0.19

Listed real estate 0.04 0.04 Allocations 0.09 0.01 0.00 0.01 0.11

  • f which environment-

related mandates 0.08 0.00 0.08 Security selection 0.19

  • 0.03

0.16 Internal security selection 0.16

  • 0.03

0.13 External security selection 0.03 0.03 Asset management 0.13 0.06 0.00 0.19 Asset positioning 0.08 0.05 0.00 0.13 Systematic factors 0.00 0.00 Securities lending 0.05 0.01 0.06 Total 0.33 0.03

  • 0.16

0.02 0.23

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SLIDE 25

25

Cont Contribution ributions to r s to rela elativ tive r e retu eturn 20 n 2013 13-2019 2019

By Strategy. Table 37. Annualised. Percentage points

Equity management Fixed-income management Real estate management Allocation Total Fund allocation

  • 0.06
  • 0.08

0.01 0.02

  • 0.10

Reference portfolio

  • 0.02
  • 0.08

0.00

  • 0.10
  • f which systematic factors
  • 0.01
  • 0.01

Real estate 0.01 0.01 Unlisted real estate 0.02 0.02 Listed real estate 0.00 0.00 Allocations

  • 0.04

0.00 0.00 0.02

  • 0.01
  • f which environment-

related mandates 0.01 0.00 0.01 Security selection 0.11 0.00 0.11 Internal security selection 0.02 0.00 0.02 External security selection 0.09 0.09 Asset management 0.10 0.07 0.00 0.18 Asset positioning 0.06 0.07 0.00 0.13 Systematic factors

  • 0.01

0.00

  • 0.01

Securities lending 0.05 0.01 0.06 Total 0.15

  • 0.01

0.01 0.03 0.19

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SLIDE 26

Retur eturn and risk 201 n and risk 2019

Government Pension Fund Global