Largest ever quarterly increase for Government Pension Fund - Global
21 November 2006
The value of the Government Pension Fund - Global increased by NOK 207 billion in the third quarter, to NOK 1 712 billion. The Fund is now the largest pension fund in Europe. The increase in value in the third quarter is the largest quarterly increase in the Fund's history. The increase was due to the transfer of new capital (NOK 79 billion), the positive return on investments and the weaker krone, which increased the market value by NOK 61 billion and NOK 66 billion respectively. The change in the krone exchange rate has no effect on the Fund's international purchasing power, however.
International equity markets experienced an upswing in the third quarter. The upswing was particularly strong in Europe, the US and emerging markets. The return on the international equity portfolios managed by Norges Bank was 5.1 per cent. Interest rates fell in key markets, and bond prices rose accordingly, bringing the return on the fixed income portfolio to 3.1 per cent.
The return on the Government Pension Fund - Global in the third quarter of 2006 was 3.9 per cent measured in terms of the currency basket that corresponds to the composition of the Fund's benchmark portfolio. The actual return was 0.16 percentage point lower than the return on the benchmark portfolio defined by the Ministry of Finance.
The return on the Government Pension Fund - Global in the first three quarters of the year was 4.6 per cent. Measured in NOK, the return was 5.0 per cent. The higher return in NOK is due to the krone's depreciation against the currencies in the benchmark portfolio. The overall return in the first three quarters was 0.05 percentage point less than the benchmark return.
The return on Norges Bank's foreign exchange reserves' investment portfolio was 4.1 per cent in the third quarter and 4.2 per cent so far this year. The return on the Government Petroleum Insurance Fund was 2.5 per cent in the third quarter and 1.7 per cent in the first three quarters. This fund is invested only in fixed-income securities.
The total market value of the portfolios managed by Norges Bank Investment Management was NOK 1954 billion. The foreign exchange reserves investment portfolio accounted for NOK 223 billion of this amount and the Petroleum Insurance Fund for NOK 16 billion.