Norway’s $1t wealth fund to scale back global real estate push

Norway’s $1 trillion sovereign wealth fund will no longer run its unlisted property arm as a separate unit from the main wealth fund and will lower the overall share of investments it puts into real estate. And it lowered its target allocation for real estate in its portfolio from 7 percent to 3–5 percent, which will apply until 2022. It has no intention of selling of current real estate assets.

The new real estate strategy will be effective April 1.

The new real estate portfolio will target between 30 percent and 70 percent of investments in the U.S. market, between 10 percent and 40 percent of the portfolio will be invested in the United Kingdom, up to 30 percent in France, and up to 20 percent each in Germany and Japan.

The new strategy will allow the sovereign wealth fund to invest in residential properties. Previously, the sovereign wealth fund primarily focused on the logistics, office and retail space, reported Bloomberg.

In addition, Norges Bank Real Estate Management, which invests on behalf of the sovereign wealth fund, will invest more in listed real estate companies, as a way of cutting costs and simplifying its approach after about two years of struggling to find properties to buy amid near record prices, reported Bloomberg.

In a recent interview with Bloomberg Markets magazine, the fund’s CEO, Yngve Slyngstad, said it has “hardly” invested in any real estate “net-net” over the past two years.

“We have been selling some and buying some,” he said. “There are two reasons for that. One reason is we don’t find the real estate market very attractive at this stage in the cycle. But the second thing is more long-term structural.”