The report is a broad analysis of different measurements and focuses particularly on the historical returns and risk. The report was last published in March 2014. There is no single number that can capture all risk, and we thereby present a broad set of measurements in this report. The modest active risk is reflected in the risk-adjusted return numbers, where the figures for Government Pension Fund Global is in line with the benchmark.
The report is updated with a simple linear regression that shows numbers for market beta, which represents the fund’s exposure to the broad market, and an estimate for the alpha of the investments, which is interpreted as the portion of the relative return that is not explained by the systematic and random movements in the market. We have also included an estimate for the alpha as part of the multivariate factor regressions. Since alpha and beta are estimated based on historical observations, they have a statistical uncertainty which may be represented by confidence intervals.
The numbers we have presented on risk and return in our annual reports have been relatively static. We supplement our annual report with a broader report on historical risk and return. There might be some key figures or analysis that are not included in the report. This is a dynamic document that can be altered to include new methods or requests for other analysis and numbers.