The path towards becoming more open and clear has not always been easy, it has at times caused some debate. Two issues in particular have been the subject of lively discussion over the past year. The first is that we now publish our own forecasts for the interest rate path. The second concerns how representatives of the Riksbank send signals regarding the interest rate in speeches and press releases. 2  BIS Review 106/2007  Interest rate path a natural step towards openness In February 2007 we presented for the first time our own forecast for the development of the repo rate. Prior to this only the central banks in Norway and New Zealand published their own interest rate paths. But this group has now grown, with the addition of the Riksbank and in March this year also the Icelandic central bank. At the beginning of this month we also decided to publish our forecast for the path of the policy rate – and a number of other important variables – in connection with each monetary policy meeting. This means that we will publish our interest rate forecast six times a year, instead of three as before. By publishing our own forecast for the interest rate we have become more open and clear with regard to our view of future monetary policy.
There is little risk that its owners will make substantial withdrawals from the Fund over short periods. Other funds or individual investors may for various reasons have to reduce their holdings or pull out of capital markets at an unfavourable time. This may be because the investments are leveraged or that a fund is subject to regulatory constraints or simply that a long-term strategy is influenced by short-term assessments. In addition to its large size and long future life, the Fund is not earmarked for particular obligations unlike traditional pension funds. As a result, the Fund has a higher risk-bearing  4  BIS Review 45/2008  capacity than other comparable funds. The Pension Fund can thus a larger extent invest in financial instruments that may vary more in value, but provide a higher expected return, which in practice means investing in equities. The allocation to equities will now increase from 40 to 60 per cent. If returns vary across different markets and market segments, spreading investments can improve the trade-off between risk and return. This is why the Fund is expanding its portfolio, not only in terms of its geographic exposure, but also the depth of its investments in individual markets. The Fund’s strategy results in a very broad market exposure. This limits the Fund’s exposure to large losses on individual investments or group of investments that are influenced by the same or closely related risk factors. Losses on individual investments or main groups of investments will offset each other in a well diversified portfolio.