øystein olsen : management of the government pension fund global ( gpfg ) introductory statement by mr øystein olsen, governor of the norges bank ( central bank of norway ), before the storting ’ s standing committee on finance and economic affairs, oslo, 30 april 2013. * * * please note that the text below may differ from the actual presentation. charts in pdf i would like to thank the chairman and thank you for giving norges bank the opportunity again this year to report on the management of the government pension fund global ( gpfg ). chart : changing the regional allocation the investment strategy of the gpfg builds on its specific features, purpose and our perception of the functioning of financial markets. the gpfg is a large fund and features a long investment horizon. the objective of investment management is to preserve the longterm international purchasing power of the gpfg. in 2012, the investment strategy was changed. as a result, investments in emerging markets have increased. just over 10 percent of the overall portfolio is now invested in these markets. chart : increasing investments in real assets the allocation to equities was increased to 60 percent between 2007 and 2009. when the allocation to real estate reaches 5 percent further ahead, the gpfg's allocation to real assets will make up two - thirds of the overall portfolio. the long - term expected return on real assets is higher than on nominal bonds. the risk is also higher, but the long - term investment horizon puts us in a solid position to carry that risk. the key to realising the higher return is to adhere to the strategy also in times of heightened uncertainty, as we did through the financial crisis in 2008 and 2009. an official framework for rebalancing back to a set allocation to equities has now been established. this will help ensure that this strategy is carried out during the next period of high volatility in financial markets. chart : lower costs management costs for equities are higher than for fixed - income securities. the cost of managing many small shareholdings is higher than managing a few large ones, as is the cost of managing investments in emerging markets in relation to developed markets. overall management costs as a percentage of the gpfg have nonetheless fallen over time. we have exploited its size to realise economies of scale. in the past few years, costs have been reduced also in krone terms. this is partly due to reduced use of external managers. costs

, 0 11, 0 10, 0 iceland 9, 0 8, 0 9, 0 8, 0 norway 7, 0 6, 0 5, 0 7, 0 6, 0 5, 0 denmark 4, 0 3, 0 sweden 2, 0 finland ( emu ) 4, 0 3, 0 2, 0 sg 240802 nominal effective exchange rates january 1990 = 100 appreciation iceland ( january 1997 = 100 ) denmark norway sweden finland depreciation source : bank of england and central bank of iceland sg 240802 norway : effective exchange rate and 12 - month interest rate differential against trading partners 4, 0 3, 5 3, 0 interest rate differential ( 12 months ) ( left - hand scale ) 2, 5 2, 0 effective exchange rate ( right - hand scale ) 1, 5 1, 0 jan. 99 jul. 99 jan. 00 jul. 00 jan. 01 jul. 01 jan. 02 jul. 02 source : norges bank sg 240802 norway : effective exchange rate forward exchange rate ( uip ) source : norges bank sg 240802