At the end of August, the chief executive of Norges Bank Investment Management, Yngve Slyngstad, suggested that expanding into other alternative asset classes, namely private equity and infrastructure, was not an “important question” for the $996 billion fund.
Slyngstad was responding to questions about whether Norway’s Government Pension Fund Global, whose investments NBIM manages, should be allowed greater freedom to invest beyond its current parameters, which currently equate to 65.1 percent in equities; 32.4 percent in fixed income; and the little brother of the trio, 2.5 percent in real estate.
While folk in the private equity and infrastructure worlds took umbrage with Slyngstad’s reasoning that the fund had missed the boat and was now too big, from a real estate perspective his comments show a vote of confidence for this asset class.
This commitment to real estate was further reinforced last month (September) with the hire of regional chief investment officers in the US and Europe. The Oslo-based fund hired from within, appointing Per Løken to lead its European activities and Romain Veber to take charge of US investment decisions. Løken and Veber previously headed up the fund’s London and Paris activities, respectively.
NBIM’s most recent CIO was Karsten Kallevig, who held the global role for five years before becoming chief executive for real estate in January 2016.
A spokesman for NBIM confirmed that the double appointment would not alter its real estate strategy. “The CIO position is not new, but the split is. The investment strategy is unchanged; we will invest at a steady pace. The investments will be split evenly between Europe and the US, and therefore dedicated CIOs are appointed in each market.”
At present, NBIM’s real estate allocation by region is 50.1 percent in Europe and 49.9 percent in the US.
To date, the fund has not made any real estate investments in Asia, where it has offices in Tokyo, Singapore and Shanghai and has been active in equities and fixed income. NBIM has previously expressed interest in the region’s property markets, with Kallevig noting two years ago that the likely starting point would be either Japan or Singapore.
With a current 2.5 percent allocation to real estate and a five-year mandate to invest up to 5 percent in the asset class, NBIM’s two new hires will have around $25 billion at their disposal between them.
Despite its size, NBIM is a relative newcomer to the real estate world, having only made its debut in 2011, following its 2007 announcement that it would be allocating a maximum of 5 percent of its investable capital in the asset class.
Its first property deal was a 25 percent stake in London’s Regent Street, acquired from the Crown Estate for £452 million ($595 million; €497 million). Its debut on American shores came two years later, when it bought a 49.9 percent share of five office properties in New York, Washington DC and Boston from TIAA.
The fund’s biggest deals to date, in the US and Europe respectively, were a $1.5 billion office portfolio purchase from Boston Properties in 2014 and a €1 billion acquisition of a Paris office from Trajan in 2016.
As of September 11, Norway’s sovereign wealth fund was valued at $996 billion. During the second quarter, GPFG generated an overall 2.6 percent return, while equities, fixed-income and unlisted real estate returned 3.4 percent, 1.1 percent and 2.1 percent, respectively.
NBIM’s real estate story
2007 – Norway’s Ministry of Finance announces fund will begin investing in real estate, with a maximum allocation of 5 percent. NBIM fund total: $273.8bn
2011 – Makes first real estate investment, a 25 percent stake in a Crown Estate portfolio in London. $404.1bn
2013 – Makes first US real estate investment, a 49.9 percent stake in an East Coast office portfolio. $535.3bn
2017 – NBIM's real estate allocation ceiling increased to 7 percent of the investment portfolio. $819.3bn