Norges Bank signals a new era

Recent news that Norway’s Government Pension Fund Global (GPFG) had decided on a new strategy for real estate led to some reports that might have made readers think it was closing down private real estate investments.

The sovereign wealth fund quickly moved to clarify the position with a second statement, which said: ‘We would like to emphasise that real estate will continue to be an important part of the bank’s investment strategy for the GPFG, and the fund will be a major player in the real estate markets in the years to come.’

The confusion came about after Norges Bank Investment Management’s executive board announced a new allocation strategy to make its real estate portfolio 3-5 % of the fund’s total assets counting both listed and unlisted property, with no specific limit on either.

As part of the new strategy Norges Bank Real Estate Management (NBREM), which was created about six years ago to invest in global unlisted property, is to be integrated with the team involved in listed real estate investments – giving the impression it was ‘closing’ the unlisted side.

The unlisted division employs around 130 people and is headed by Karsten Kallevig.

Egil Matsen, deputy governor Norges Bank, explained to EuroProperty: ‘The reason we think it is sensible at this point to combine forces of the listed and unlisted side is that the target allocation is being slightly adjusted.

‘Under the new strategy, we have a target allocation for the two combined. There are clear signs that we can gain more exposure to this important asset class on the listed side. In addition, there is an emphasis on cost effectiveness so there may be some synergies when the two are combined.’

No sales of property are required under the new direction either.

The timing of the decision is down to Norges Bank reviewing its investment practices every three years. It is in the third year of the latest period and for real estate decided to start its strategic review early because it wants a new strategy in place before next year’s budget. The integration takes place on 1 April this year and the new three-year period begins on 1 January 2020.

All 130 staff within NBREM are due to transfer and Matsen says it is difficult to know how many people they will join on the listed side because there is no separate organisation for it. But clearly there are fewer people in the listed side than unlisted.


This story first appeared in EuroProperty, PropertyEU's sister publication


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