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Major SWF may move into unlisted infrastructure before long

by Reg Clodfelter

Norway’s Ministry of Finance is currently considering whether to allow Norges Bank Investment Management, manager of Norway’s $865 billion Government Pension Fund Global, to finally dip into unlisted infrastructure, including in the renewable energy sector and emerging markets, though a final decision will not be presented to Norway’s parliament until the spring of 2016, according to a statement released by the Ministry of Finance.

“Developing the fund’s investment strategy through better diversification will help to ensure continued robust, long-term management of the fund,” explains Minister of Finance Siv Jensen, in the statement.

NBIM first became open to the idea of investing in infrastructure earlier this year when it released its 2014–2016 strategic investment plan, despite outlining reasons to avoid the class as recently as 2013. Still, only listed infrastructure options were being considered at that time, and no specific timeframe or capital allocation for future infrastructure investment was outlined.

If the move into unlisted infrastructure is approved, it will certainly be a step in the right direction for improving the globe’s massively underfunded infrastructure, as even a 1 percent allocation will yield investment of nearly $9 billion.

Norway’s Ministry of Finance will also be assessing the sovereign wealth fund’s 5 percent real estate allocation cap set back in 2010, though it is not indicated whether they are considering an increase or a decrease to the cap. Currently, only 1.3 percent of the sovereign wealth fund is invested in real estate, though NBIM’s 2014–2016 strategic investment plan called for 1 percent of the pension fund to be invested in real estate annually through 2016, a move that has seen NBIM engage in multiple billion-dollar property deals in 2014, including a $1 billion joint venture with Prologis to acquire U.S. industrial properties in January, and the purchase of a 45 percent interest in three U.S. office properties from Boston Properties for $1.5 billion in September.

 

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