Norges signals more aggressive real estate strategy

Norway's giant oil-fuelled sovereign wealth fund has outlined a more aggressive and independent strategy to expand its global real estate holdings over the next two years to about €20 bn.

The €651 bn Government Pension Fund Global, the largest world's largest sovereign wealth fund, expects to invest 1% of its fund over the next three years in private real estate.

The fund will also increase staff numbers at its real estate division to 200 and apply more hands-on management when investing directly in addition to using joint ventures with asset managers. The fund is targeting a total work force of 600 by 2016 from 370 at present.

The plan was revealed by the fund's manager, Norges Bank Investment Management (NBIM), on Tuesday in a strategy document for 2014-2016. CLICK HERE for a PDF of the strategy paper.

The Norwegian SWF has long been invested in listed real estate, holding about 1.3% of all listed stocks in the world, including a large number of prominent stock market-listed property companies. In 2010 it began investing directly in European real estate, followed by US property in partnerships with major asset managers such as AXA Real Estate, Generali Real Estate and Prologis.

FULLY OWNED PROPERTIES
NBIM has now signalled an evolution of its strategy. 'We will prepare the organisation for management of fully owned properties and a more active role in the development of our properties. Larger ownership stakes in listed real estate companies and public-to-private transactions will be considered.

'Our US investments will be concentrated in New York, Washington DC, Boston and San Francisco. In Europe, investments outside London and Paris will be selectively extended. In the course of the strategy period we will also consider investment opportunities in global cities outside Europe and the US.

'We will continue to capture globalisation through investments in global distribution networks. We expect to invest one percent of the fund each of the next three years in the private real estate markets.'

Since 2010 the fund's has worked towards a target portfolio of about 5% in real estate, 60% in equities and 35% in fixed income products. Real estate accounted for 1.2% of the portfolio at the end of the first quarter of 2014, with the equities and fixed income slightly above their target weighings.