Norway’s sovereign wealth fund is planning to invest approximately $11 billion in the U.S. real estate market. The fund will eventually put a full five per cent of its assets into commercial property.
Yngve Slyngstad, chief executive officer of Oslo-based Norges Bank Investment Management, has determined that one-third of this amount, or 1.7 per cent of its holdings, will be invested in the United States.
As of the end of September, the fund held the majority of its assets (60.3 per cent) in stocks and bonds. Only 0.3 per cent of its holdings were in real estate.
Slyngstad commented recently that the United States is the “next real estate market to invest in.”
Sovereign wealth funds are investment pools that are owned by the state. The fund manager is seeking to diversify the level of risk by investing in markets other than stocks and bonds.
Norway is seeking higher returns and a lower level of risk after being stung by record losses in 2008. The fund has approval to invest up to five per cent of its value in real estate and these investments will be made over several years.
The fund is focused on finding conservative investments. Large office complexes in major cities will be the types of properties it will be most interested in. It has already completed transactions to buy properties in London and Sheffield in the UK.
Norges Bank’s European holdings also include properties in Paris, Frankfurt and Berlin. The fund recently added an office complex in Zurich to its portfolio of properties.
More than 60 per cent of sovereign wealth funds have some real estate holdings in their portfolio, according to London-based research firm Preqin Ltd. Large government funds are more likely to invest in commercial real estate, Over 80 per cent of funds managing $250 billion or more in assets are active in this market.
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