Norway’s sovereign wealth fund is the largest in the world, and it recently claimed that Asian real estate could be a particular hot-spot for growth.
The $860 billion fund invests on behalf of the Norwegian government, which gave permission to invest 5% of the fund in property in 2010. Norwegian officials are now studying whether or not it should add more real estate to its portfolio, writes Saleha Mohsin in Bloomberg.
Asian real estate a new focus for Norwegian fund
So far the fund has bought properties in New York, Paris, London and Berlin, but it is now targeting Tokyo and Singapore.
It's no secret that this year has been a volatile one for the markets. The S&P 500 is down 18% year to date, while the Nasdaq Composite is off by 27% year to date. Meanwhile, the VIX, a key measure of volatility, is up 49% year to date at 24.72. However, it has spiked as Read More
“The vast majority of academic studies come to the conclusion that adding real estate does improve the risk-return profile of a mixed-asset portfolio,” read a discussion note based on research released on Friday. “Estimates of optimal allocations to real estate vary strongly. The median range of the suggested allocations to real estate in the 30 studies reviewed was 15 percent.”
The fund is overseen from within the Norwegian central bank by Norges Bank Investment Management, which held approximately 3% of its assets in real estate at the end of Q3. That share is set to increase as it invests around $5.8 billion each year in property, focused on 10-15 global cities.
Fund looking to end run of successive quarterly losses
According to the fund, returns on property averaged 7-9% from 2000-2013 but have declined of late. In another research note it said that it may be best to emerge in property in emerging markets.
“A considerable population growth, combined with positive wealth effects and urbanization, appears to favor emerging markets, particularly Asia,” the fund said.
In Q3 the fund suffered its first back-to-back quarterly losses in six years, losing $32 billion due to a global dip in stock prices. Its stock holdings fell 8.6% while bonds gained 0.9% and real estate