The Norwegian government has given the country's $440 billion sovereign wealth fund the go-ahead to invest up to five percent of its assets in real estate in order to increase returns and reduce overall risk.
The fund, known as the Government Pension Fund Global, invests all of its assets abroad in order to avoid stoking inflation at home. Launched in 1996, the fund up until now has invested exclusively in stocks and bonds and ranks as Europe's largest stock owner.
In 2008, the fund suffered huge losses that erased all the gains made since its inception. It recovered somewhat last year, earning 529 billion kroner ($89 billion) in the first nine months of 2009 and a record 13.5 percent return in the third quarter, fueled by an 18 percent jump in the European Dow Jones Stoxx 600 index for the quarter.
The fund's initial real estate investments will be made in Europe. It is in the process of hiring a head of real estate to be based in London and is talking to several UK property companies about setting up joint ventures. Over time, the fund intends to broaden the geographic scope of its holdings in line with rules intended to promote diversification. Norwegian Central Bank spokeswoman Siv Meisingseth told Bloomberg BusinessWeek that the fund had already built up "internal competence" in London and intended to start acting on its mandate there.
The fund's investable assets come from Norway's oil revenues and are invested according to guidelines set by the government. The central bank manages the fund, which is the second largest sovereign wealth fund in the world after that of Abu Dhabi.
Written by Sandy Smith
For HULIQ.com
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