Norway’s sovereign wealth fund is closing its unit which invests in unlisted real estate and cutting its overall real estate allocation target as part of a change in strategy.
Norges Bank Investment Management (NBIM), which manages the NOK 8.6 tln (€883 bn) Government Pension Fund Global, said it will continue to hold 3-5% of property, both listed and unlisted investments, but ‘with emphasis on cost efficiency and investments that require limited resources’.
Under the previous management mandate for the wealth fund, Norges Bank could invest up to 7% of the fund in unlisted real estate, and had invested around 3% as of year-end 2018. In addition, it had established a portfolio of listed real estate investments.
According to PropertyEU's latest Top Investors ranking by AUM, NBIM had €11.6 bn of real estate assets under management in Europe over 2017 and €22.3 bn worldwide.
Together, these listed and unlisted investments accounted for around 4% exposure to property. Up until now, unlisted real estate investments have been managed by Norges Bank Real Estate Management (NBREM) as a separate operational unit, with listed real estate investments managed together with the other listed equity investments.
Strategy change
In a letter to the Norwegian Ministry of Finance, Norges Bank suggested a strategy change.
'With a limited portfolio of unlisted real estate and a desire to integrate listed and unlisted real estate, the executive board finds that it is no longer appropriate to organise the management of unlisted real estate separately,' the letter said.
The fund proposed a new approach: 'The aim is a real estate portfolio on the order of 3–5%. The real estate portfolio shall comprise both listed and unlisted real estate investments and there is no specific limit for the proportion of listed real estate investments. The real estate portfolio shall be broadly diversified, and the strategy shall be simple, with weight given to cost-efficiency and investments that require limited resources. There shall be flexibility for taking advantage of special investment opportunities that may arise in the unlisted real estate market.'
Divisional merger
In discontinuing NBREM as a separate organisational unit, the fund's real estate organisation will be integrated into Norges Bank Investment Management (NBIM). According to current plans, a new organisational model for NBIM will come into effect as of 1 April 2019.
