Features

Voting at general meetings is a fundamental shareholder right that gives us an opportunity to influence the governance of the company. As a shareholder, we must manage this right in the best possible way. There are many obstacles to efficient crossbord voting, and we are working towards improvement and simplification of the processes involved in global voting.

We estimate a five-factor model for the equity portfolio based on historical returns for the past 11 years. The analysis shows that the equity portfolio has been exposed to a number of systematic risk factors at times. However, these exposures vary considerably over time, and exposure to most systematic risk factors has decreased over the past couple of years. The estimate of alpha, which is used as an indicator of the quality of investment management, is positive, and seems to be robust to different market regimes.

Transfers of new capital to the Government Pension Fund – Global are determined largely by the amount of revenue from oil and gas production accruing to the Norwegian State. The accumulation of the fund can therefore be seen as a way of converting non-renewable natural resources into savings in global financial markets. The fund is currently in a phase where the allocation to equities is being increased in order to improve the long-term trade-off between risk and return. This is happening at a time when the relative value of petroleum resources and equity investments is more favourable for an oil producer than previously in the fund’s history.

The Government Pension Fund – Global’s equity portfolio is highly diversified across both regions and countries. From the time of the first equity investments in 1998, the benchmark index for equities (FTSE) consisted of the largest listed companies, while NBIM was also able to invest in smaller companies provided that they were listed.

Speech by Governor Svein Gjedrem at the conference “Commodities, the Economy and Money” in Calgary, Canada, 20 June 2008