The new global head of real estate of Norges Bank Investment Management (NBIM) has confirmed that Norway’s sovereign wealth fund will become more “flexible” and “nimble” when investing in real estate, with the ability to invest in funds and operating platforms.
Alexander Knapp, who was appointed global head of real estate earlier this year, says NBIM will invest in a “more strategic way” – including through funds, platforms and partnerships with asset managers – to meet the rapidly-growing fund’s target return for the asset class.
Knapp, the former European CIO of real estate fund manager Hines, tells IPE Real Assets that NBIM is replacing the approach of directly owning large assets in a select few cities to “one that enables us to invest in the major food groups of real estate, including private market residential, [and] an ability to do fund and platform investing for the first time”.
He says: “You’re going to see us doing fewer direct acquisitions and more bilateral arrangements with partners – working through separate accounts and the like at a strategy level, rather than an asset level.”
This year, Norway’s Finance Ministry commissioned a review of the active management of the NOK21.2trn (€1.8trn) Government Pension Fund Global, including real estate and infrastructure, resulting in last month’s letter to the Finance Ministry setting out how NBIM “is not satisfied with the results in real estate management, and is now making changes to the strategy”.
The historic performance has “not been good enough”, says Knapp. “But we have the good fortune of a new strategy, and also of being relatively under-deployed compared to peers. So we can also be active in the market today – perhaps [where] others can’t.”
The sovereign wealth fund is close to the bottom range of its target allocation for real estate of between 3% and 7%. Its real estate portfolio is currently evenly split between listed and private investments, but NBIM plans to grow the latter.
In 2019, NBIM closed its dedicated real estate arm, which over the previous decade had made a series of large direct deals, starting with an investment in 2010 in The Crown Estate’s Regent Street portfolio in London.
As NBIM publishes its new three-year strategy plan, Knapp says the new strategy for real estate better “reflects changes” that had taken place in the market since the sovereign wealth fund first began investing in the asset class, including the need to “get access to operational excellence”.
Knapp – who has experience of operational real estate, having led the creation of Hines’ European student housing platform from 2014 and overseeing European residential investments as a senior managing director from 2017 – says: “All sectors of real estate these days are operational – even offices, even logistics. And so then what’s your route to the operational excellence?”
Means of access could include investing in funds or investing in operational platforms. “We do need to work at scale, and we do need to have alignment with our partners, and we do need to find ways of accessing great operational teams,” he says.
To read the latest IPE Real Assets magazine click here.
