The Government Petroleum Fund 1998
The Benchmark Portfolio
The benchmark portfolio is an imaginary portfolio and is not actually invested. This portfolio define the neutral investment strategy according to the guidelines. It is constructed by using the mid values of the permissible intervals for the asset classes, for regional portfolios, etc. The two asset classes, equities and bonds, are represented by commonly used equity and bond indices in each country. These indices are composed of particular stocks and bonds, in order for the indices to reflect the price changes in the respective markets.
The Chart shows the composition of the banchmark portfolio as per 31 December 1998. The portfolio is first allocated into 40 per cent equities and 60 per cent bonds. The equities and bond portfolios are then allocated to the three regions, the America, Europe and Asia/Oceania with shares of 30 per cent, 50 per cent and 20 per cent, respectively.
Within these regions the equities portfolio is allocated to individual countries in proportion to the market values of their equity markets, while the bond portfolio is allocated in proportion to their gross national products. The implication of all this is that the value of the benchmark portfolio will be a weighted average of the values of securities in each of the countries included.
