Norway gives approval for oil fund to buy real estate
March 1 (Bloomberg) -- Norway gave approval for its $440 billion sovereign wealth fund to invest as much as 5 percent of its value in real estate to increase returns and limit overall risk after record losses in 2008.
“By investing in real estate, we spread the fund’s risk even more,” Finance Minister Sigbjoern Johnsen said in a statement today. “Real estate is the largest asset class after shares and bonds, and these investments fit well with the fund’s investment profile.”
The fund, built from Norway’s oil and gas revenue, gets its investment guidelines from the government and is managed by the central bank. It was last year allowed to raise its stake in stocks to 60 percent, and will be allowed to build a position in real estate, estimated today at $22 billion, and cut its bond holdings by an equivalent amount.
The Government Pension Fund Global, as it’s formally known, invests petroleum revenue abroad to avoid stoking inflation and is Europe’s biggest owner of stocks. Norway is the world’s sixth-biggest oil exporter and second-largest gas exporter.
Internal Competence
The guidelines for investing in property include rules on diversification of investments over time, countries and real estate categories, the ministry said. It will take “several years” to phase the funds into real estate, it said.
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