Investment Policy Statement: Norges Bank Investment Management

This Investment Policy Statement is specifically designed to accommodate the investment objectives of institutional investor Norges Bank Investment Management’s “Government Pension Fund Global”. The IPS focuses specifically on the Fixed Income portfolio within the entire fund. The main return objective is to achieve a maximized annual return exceeding the selected benchmark, Bloomberg Global-Aggregate Total Return Index (ticker: LEGATRUU). The risk key risk constraint is set as a maximum expected tracking error of 1.25%, with a leniency allowing the chosen portfolio to exceed this amount for one out of every three years. This key risk constraint, along with other constraints set in the IPS, preserve a low-risk investment profile across the portfolio. The time horizon is perpetual, given the fund’s nature and mission. The investment philosophy focuses on maximizing income generation through a buy-and-hold strategy, a rigorous security selection process focused on maximizing the quality of the selected issuers, and macroeconomic analysis. The strategic asset allocation encompasses the constraints set out by the client and allocates NOK 7.085 trillion to the asset class at the center of this IPS: Fixed Income. The proposed portfolio aims to achieve an annual expected return of 3.5% and a volatility of 0.14%. The proposed portfolio selects 23 securities to invest in. An in-depth risk evaluation is performed using Value at Risk and Expected Shortfall methodologies, based on historical observations and simulation models. Analysis across multiple confidence levels (1%, 5%, and 10%) suggests the portfolio is well-positioned to endure unfavorable market scenarios, namely to deal with credit risk. In summary, this Investment Policy Statement outlines a comprehensive strategy that is aligned with the client’s goals and limitations, supporting a well-balanced risk-return profile. It functions as a reference point for ongoing investment decisions associated with Government Pension Fund Global, targeting long-term growth and financial stability. The IPS has been structured in accordance with CFA guidelines.