Benchmark index

Benchmark description

The Government Pension Fund Global composite was assigned a benchmark on 1 January 2017, after the Ministry of Finance changed its management mandate to specify that all the fund’s investments, including the real estate and unlisted renewable infrastructure investments, are to be measured against the fund’s benchmark index consisting of global equity and bond indices. For periods prior to 2017 no benchmark returns are presented, as no appropriate benchmark had previously been assigned to the real estate portion of the fund. Any benchmark for the total portfolio would have excluded this asset class; therefore, none had been deemed appropriate. The current strategic benchmark index weights, adopted on 1 May 2019, are 70 percent for equity and 30 percent for fixed income.

The equity part of the strategic benchmark index is composed on the basis of the FTSE Global All Cap Index. The benchmark is market capitalisation weighted with an additional layer of country factors applied to it. The equities in the benchmark index are assigned the following factors based on their country of origin: European developed markets excluding Norway 2.5, USA and Canada 1, other devel oped markets 1.5 and emerging markets 1.5. The allocation to countries and regions and the distinction between developed and emerging markets are based on the FTSE Global All Cap Index. New markets added to the FTSE Global All Cap Index from 1 January 2019 onwards are assigned a weight of 0. The benchmark is adjusted for the Norges Bank’s tax position on dividends. Securities issued by companies excluded by Norges Bank pursuant to the guidelines for observation and exclusion from the Govern ment Pension Fund Global are not included in the benchmark index for the equity portfolio. As at 31 December 2022 the equity benchmark consisted of 45 countries and around 9,000 securities.

The fixed-income part of the strategic benchmark index consists of 70 percent developed market  government debt (nominal and inflation linked government bonds, and including bonds issued by supranational organisations) and 30 percent developed market corporate debt (corporate bonds, including covered bonds). The index consists of the Bloomberg Barclays Global Treasury, GDP weighted by country, the Bloomberg Barclays Global Inflation-Linked index (Series L), and the subgroup Supranational (within government related) in the Bloomberg Barclays Global Aggregate bond index for the government sector and all corporate bonds and the subgroup covered bonds within Bloomberg Barclays Global Aggregate limited to the currencies US dollars, Canadian dollars, euros, British pounds, Swedish kronor, Danish kroner and Swiss francs. The Bloomberg Barclays indices are not adjusted for  withholding tax but are adjusted for excluded companies/issuers. At at 31 December 2022 the benchmark consisted of 12 currencies and around 17,000 securities.

In the operational management of the fund, to ensure an overall risk management of the fund, the listed, unlisted real estate and unlisted renewable infrastructure investments are assigned benchmarks with a  combination of bonds and equities from the overall GPFG benchmarks tailor-made to the actual currency composition and characteristics of the real estate and unlisted renewable infrastructure investments. The remaining investments are assigned benchmarks where the actual composition of the unlisted renewable infrastructure, unlisted and listed real estate benchmark are adjusted from the actual benchmark.