GLOBAL – The NOK3.7trn (€506bn) Norwegian Government Pension Fund Global is to invest approximately one-third of its target 5% real estate allocation in US office and retail property starting next year.

The move requires a new mandate from the Norwegian finance ministry.

Under the current mandate, the Norwegian sovereign wealth fund may invest only in European property, but it is now likely to target the largest US markets.

The fund is understood initially to have considered investing directly, but the tax position between Norway and the US would have made direct investment difficult.

It is currently considering alternatives to direct investment, including investment in non-listed real estate securities.

It appears to have ruled out investing in US listed real estate because of differences between US and European listing requirements.

Norges Bank Investment Management (NBIM), which manages the fund, originally invested in European listed to diversify its portfolio.

It now holds major shareholdings in listed companies including British Land and Grainger.

Norges' shift into US property comes with a recent acceleration of the fund's acquisition activity.

"We're now large enough to carry out more than one project at a time," said Øystein Sjølie, a spokesman for NBIM.

The fund had less than 1% of its overall portfolio allocated to real estate in the third quarter.

So far, the fund has invested in four European countries, including the CHF1bn (€0.8bn) acquisition last week of the Uetlihof office complex in Zurich.

The fund initially invested 100% of its real estate allocation in the UK, where it has set up five companies to manage part of its portfolio, subsequently dividing the allocation between the UK and France.

"Geographically and institutionally, European markets are closer to us [than the US]," Sjølie said. "It's easier to know the rules."

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