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NBIM to invest $9b annually in real estate through 2016, begin investing in infrastructure

by Reg Clodfelter

Norway’s $885 billion Government Pension Fund Global, managed by Norges Bank Investment Management, is planning to invest 1 percent of its total fund — roughly $8.8 billion — into global real estate each year until 2016, and will begin investing in infrastructure for the first time, according to its recently released 2014–2016 strategic investment plan.

NBIM did not begin investing in real estate until 2010 and did not have a mandate to invest outside of Europe until January 2013, after which it acquired a number of properties in the United States through joint ventures. Currently 1.2 percent of the fund is invested in real estate, though NBIM expects that number to eventually reach 5 percent. NBIM will focus on core retail and office properties in a limited number of large global cities, and, though its real estate investments to date have primarily been through joint ventures, it will begin to focus more on direct investment and management of fully owned properties.

U.S. investments will continue to be concentrated in Boston, New York City, San Francisco and Washington, D.C., and investments in Europe will primarily be in London and Paris, though investments outside those markets will be selectively extended. NBIM will also consider investments in major cities outside the United States and Europe over the course of its 2014–2016 investment period.

The new strategic investment plan also calls for NBIM to begin investing in infrastructure, an asset class it has refrained from in the past. As recently as last year, NBIM outlined its reasons to avoid the class, citing a general lack of homogeneity within the asset class as the biggest reason.

NBIM’s new investment plan did not outline a specific timeframe or capital allocation for future infrastructure investments.

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