Norwegian SWF plots first Asian deals

Having built up a $10 billion property portfolio from investments in Europe and the US, Norway’s $860 billion sovereign wealth fund now has its sights on Asia.

Norges Bank Investment Management (NBIM), the steward of Norway’s $860 billion sovereign wealth fund, is planning to make its first investments in Asia.

Karsten Kallevig, NBIM’s head of real estate and a former Asia-based senior executive at private equity real estate firm Grove International Partners, told news service Bloomberg that it would narrow its focus to two cities in the region “with best growth potential and where there are supply constraints”.

The cities have not yet been chosen, NBIM told PERE. However, PERE learned earlier this year that NBIM had sent representatives to Asia to assess potential acquisitions and that included a visit to Tokyo.

Nonetheless, NBIM said there was no staff currently dedicated to Asian real estate and that the strategy was yet to be finalized.

In his interview with Bloomberg, Kallevig said the fund would however be invested in mainstream property types like offices and logistics rather than alternative property types like hotels and restaurants.

NBIM, which since being permitted by the Norwegian government to invest up to 5 percent of the fund in property in 2010, first invested heavily in mature markets in Europe, in cities including London and Paris.

Last year, it extended its investment mandate to include US cities. In total, it has acquired a portfolio valued at $10 billion, reflecting 1.2 percent of the fund’s total assets.

Thus far, these assets have performed far better than the fund requires and have also beaten the IPD benchmark, a commonly-used barometer for assessing real estate performance. While the fund is required to make 4 percent a year across asset classes, NBIM’s property investments actually returned 11.8 percent in 2013, versus the IPD average in the year of 8.3 percent.