Norway's SWF to invest EUR 16b in real estate

Norway's Ministry of Finance has unveiled new rules allowing the country's sovereign wealth fund to invest up to NOK 130 bn (EUR 16 bn) across the world's property markets. According to the new guidelines, the Norwegian pension fund will allocate 5% of its investment portfolio to real estate, with a focus on developed markets. As a result, the fund's allocation to fixed income will be reduced to 35% from 40% held previously.

Norges Bank Investment Management, managers of the NOK 2,640 bn fund, will be allowed to make direct or indirect investments in real estate, through the acquisition of equity and interest-bearing instruments issued by listed or non-listed companies, fund structures and other legal entities active in real estate development, investment, management and finance.

Norges Bank's Chief Executive Yngve Slyngstad said the fund was primarily looking at opportunities in Europe, and added that the move is part of its strategy to diversify risks over a number of asset classes. Minister of finance Sigbjørn Johnsen added: 'Investments will principally be made in well developed markets and within traditional types of real estate. Even so, we must be prepared for real estate prices to fluctuate a good deal'.

The ministry said it would seek to minimise risk by spreading the investments over time, countries and types of real estate.

The announcement follows the approval by the country's parliament in June 2008 of a plan to start investing in real estate in efforts to limit risks. The new strategy was prompted by the record losses reported in 2008 when the fund shed nearly a quarter of its value.