The valuation of the fund is calculated according to the fair value principle, which means that in the opening and closing values of the portfolios are set at market prices at the beginning and end of the calculation period. In line with the pricing hierarchy applied, index suppliers’ prices are given priority for securities included in the benchmark indices. The benchmark indices are based on components produced by FTSE Group and Bloomberg Barclays Indices for equities and fixed income respectively.
The market value calculated for the funds is based on the trade date of transactions. Transactions affect the composition of the fund on the day on which they are agreed even though it can take a number of days for them to be settled (value date). Interest expenses and income, dividends and withholding tax are accounted for on an accrual basis when calculating returns.
Transfers to and from the Government Pension Fund Global and between the equity, fixed income and real estate portfolios are normally made on the last business day of each month, but can also take place during the month. The return is calculated as the change in market value, adjusted for incoming and outgoing payments, since the last calculation date (month-end or date of previous transfer to the fund). Sub-periods are geometrically linked when calculating return for longer periods, such as quarterly, annual and year-to-date returns. This means that the return indices for each sub-period are multiplied to produce a time weighted return. Returns for periods exceeding one year are annualised. Returns are calculated in both Norwegian kroner and the fund’s currency basket. The return in kroner is calculated on the basis of market values in kroner, translated from local currencies using WM/Reuters exchange rates (closing spot rates, fixed at 4 p.m. London time).
The fund’s return expressed in the currency basket is based on the return measured in kroner and adjusted geometrically for the return of the currency basket. The currency basket corresponds to the currency weights in the benchmark portfolio, and the return indicates how much the krone has appreciated/depreciated against the currencies in the benchmark.
Relative return is the arithmetic difference between the return of the actual portfolio and the benchmark for the period in question (month, quarter, year or annualised period).
The development of the fund’s international purchasing power is best expressed through the fund’s currency basket. Fluctuations in the krone exchange rate affect the return measured in kroner but have no bearing on the fund’s international purchasing power. Norges Bank therefore gives priority to presenting return data in international currency when reporting both the fund’s return and the relative return against its benchmark.
Returns in international currency
The fund invests in international securities. Returns are generally measured in international currency – a weighted combination of the currencies in the fund’s benchmark index for equities and bonds. Unless otherwise stated, results are measured in this currency basket.
Last saved: 15/08/2016