Returns

Cost-adjusted relative return

The fund’s relative return after management costs can be compared with the investment performance that could theoretically be expected to be achieved with a passive index management strategy.

A passive investment strategy would aim at replicating a benchmark following set rules. The estimated relative return of a passive strategy is dependent on various estimated cost components. The return adjustments made are management costs of a passive strategy, revenues from securities lending, transaction costs related to replication of the benchmark index, and transaction costs related to inflows and extraordinary benchmark changes.

Management costs of a passive strategy

The estimated management costs for a passive management strategy are based on the fund’s actual management costs for each year, where costs related to active management strategies have been subtracted.

Revenues from securities lending

Unlike a theoretical index, but similar to an actively managed portfolio, a passive index portfolio would also be expected to generate income from securities lending activities. In this analysis, actual revenues from securities lending have been used, consistent with the financial reporting for the fund

Transaction costs related to replication of the benchmark index

Changes in the equity and bond indices, such as company inclusions and periodic index re-weightings, would trigger transactions in the portfolio and subsequent costs. These index replication costs are estimates based on models and not on realised costs, and are therefore uncertain in nature. 

Transaction costs related to inflows and extraordinary benchmark changes

These costs are estimated costs related to the phasing-in of new capital into the fund, costs related to the set rules for rebalancing of the asset allocation in the benchmark, and transition costs related to rule changes for the benchmark. The broad benchmark indices for equity and fixed-income investments set by the Ministry of Finance are used as the underlying indices. The costs related to inflows, rebalancing and index transition costs are estimates based on standard market assumptions about trading costs and not actual realised costs, and are therefore uncertain in nature.

The fund's management costs are driven by the fund's underlying management areas. A breakdown of the 2023 management costs and relative returns after management cost by management areas is found in the below table.  

The benchmark index is made up of global equity and bond indices. Hence, the funds estimated management costs of replicating the funds’ benchmarks are only relevant for the equity and bond indices. A breakdown of the 2023 estimated management costs of the equity and bond indices is found in the below table.

Investment outlook

With a large, global fund and a 70 percent allocation to equities, we have to be prepared for considerable fluctuations in the fund’s return and market value. Learn about the factors that may affect the fund and the markets in which we invest.

Returns in international currency

The fund invests in international securities in foreign currency. The fund’s returns are generally measured in international currency – a weighted composition of the currencies in the fund’s reference indices for equities and bonds. This is known as the fund’s currency basket and consisted of 35 currencies at the end of the first half 2024. Unless otherwise stated, results are measured in this currency basket.

Relative and risk-adjusted return

In decomposing the fund's relative return and risk-adjusted return we distinguish between the terms equity investments and equity management. Equity investments is the total holding of listed stocks measured against the strategic equity benchmark from the Ministry of Finance. Equity management is our holding of listed stock excluding listed real estate that is managed together with unlisted real estate in the overall real estate management, measured against a benchmark adjusted for funding of listed and unlisted real estate investments. The same goes for fixed income. 

Methodology for the calculations of returns

The methodology for calculating returns on the funds managed by Norges Bank Investment Management is based on the international standard Global Investment Performance Standards (GIPS®). This is GIPS reports and the GIPS compliance manual, including formulae for calculating returns.