Norway’s $888 billion sovereign
wealth fund plans to bring more of its real estate portfolio under in-house
management as part of a move to broaden its portfolio.
Laying out its plan for
2014-16 in a strategy report published this morning, Norges Bank
Investment Management (NBIM)—the group responsible for the management of the
Government Pension Fund Global—said it would add “new frontier markets” to its
equity portfolio, as well as include more currencies in its fixed income
allocation and take larger stakes in companies.
NBIM said it planned to
invest 1% of the fund a year—roughly equal to $9 billion according to the
fund’s current size—into private real estate markets between 2014 and 2016. The
group also stated its intention to take on full ownership of more property
“Our real estate
investments to date have primarily been implemented through joint venture
agreements,” NBIM said. “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.”
The move is part
of plans to “build a global, but concentrated, real estate portfolio” with
investments focused on major cities in the US and Europe, NBIM said.
“We will continue
to capture globalisation through investments in global distribution networks,”
the group added, implying that the fund could replicate the deal struck late
last year with US
developer Prologis to invest
jointly in a portfolio of logistics properties.
said it planned to take larger ownership stakes in “selected companies”, with
the number of stakes of 5% or more rising to 100 by 2016. Due to its size, the
fund already owns an average of 1.3% of every listed company in the world.
“With more than
8,000 companies in the fund, we are mindful that we cannot cover all companies
in depth,” NBIM said. Instead, external managers are to be used for exposure to
emerging and frontier markets, with the number of external mandates across
equities and fixed income expected to hit 100 by 2016.
The world’s largest sovereign
wealth fund appears serious about its diversification plans. As well as the
expansion of its real estate capabilities, Petter Johnsen, CIO for equities,
has already spoken this year of a recruitment
drive to double the
Government Pension Fund Global’s equity team to roughly 200 people. It has also advertised
for economists to aid its
asset allocation team and has lobbied
the Norwegian government for
permission to invest in private equity and infrastructure.