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IPE special report May 2018

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Norway state fund rejects real estate before 2007

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REAL ESTATE - The Norwegian finance ministry says moving into real estate "just isn't a priority" for the Government Pension Fund, despite reports of an imminent 8-10% allocation.

A spokeswoman for Norges Bank Investment Management (NBIM), which runs the €188bn fund, described as "pure invention" a claim made last week in daily Aftenposten that it would put $50bn into property. 

"It's based on what the journalist thought he would do, rather than what we would recommend," she said.

A further report on an FT website suggested that the budget to be published on October 6 would include proposals for real estate. In fact, no decision on property will be published until the spring, according to Michael Skancke, director-general of asset management at the finance ministry, which determines the fund strategy.

The fund, the former Petroleum Fund, has made little secret of its support for diversification - though probably more modest than the mooted 10% - into real estate. The spokeswoman said NBIM had already written to the finance ministry recommending that it consider other asset classes. 

The ministry said it would also consult its "in-house people" and its six-strong ad hoc expert panel before making a decision. It will publish their advice with its decision.

More pressing for Skancke is the fact that the fund is underweight in equities, which make up just 40% of the fund, against 60% fixed income.

Political pressure for ethical equities was one of the reasons for a review of the equities allocation, he said.

In recent months, the finance ministry has come under scrutiny for its equities screening process, described by US ambassador Benson K Whitney as disproportionately skewed against US companies (IPE, 8 September 2006).

"We've had the same share in equities since 1998," said Skancke. "In that time, the fund has grown and so has our practical fund management experience."

 

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