NORWAY - The Government Pension Fund - Global has warned market conditions and the need for new rules means it is unlikely to reach its 5% allocation to real estate for "several years".

A report from the Ministry of Finance on 'the management of the government pension fund in 2008', said despite deciding to move into real estate in 2008 new regulations are required to allow it to invest through unlisted instruments, and these are not expected to be finalised until sometime in 2009.

In addition, the report noted the global real estate market had poor returns and a significant drop in turnover in 2008, so the ministry confirmed it "is not intending to lay down a fixed investment plan for the coming years, as the phasing-in will have to be adapted to the market conditions and capacity".

It suggested the property investments in the first few years will "probably be concentrated in a number of chosen areas, and it will take time to build up a global real estate portfolio with a high degree of risk diversification. The ministry assumes it will be several years before the real-estate portfolio constitutes 5% of the fund".

The new rules for real estate will be included in a new regulation governing the management of the Government Pension Fund - Global, expected to come into force on 1 January 2010, so although they have yet to be finalised the report confirmed restrictions are going to be introduced so "unlisted real-estate companies and funds cannot be established in closed jurisdictions", or tax havens.

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