Last week Norges Bank Investment Management (NBIM) – the entity that controls Norway’s $890 billion wealth fund – announced that it would be ramping up its investment into global real estate.
The fund has been permitted to invest into real estate since 2011 and at the end of 2013 held 1% of its portfolio in real estate. However, because its target allocation is actually 5%, it will seek to invest 1% of its fund in each of the next three years. Yes, $27 billion looking for real estate investments during the next three years.
There are a few interesting components to their strategy. First, NBIM staff dedicated to real estate will increase to about 200 people – a lot more eyes, ears, and hands to source and manage their real estate investments. Geographically, most of NBIM’s recent investment has focused on the US and Europe and they will now look at other major markets in Asia and “global cities outside Europe.” This could include a more direct stake in emerging markets. Finally, NBIM will be doing fewer JVs and looking to manage fully-owned properties, plus an increase in active involvement with development. Part of this strategy will also be seeking public-to-private transactions.
Not only does this story underscore some of the trends identified in our earlier posts in this space (e.g., Capital Surge), but it is also interesting to think about its impact on the marketplace. NBIM’s activities could be seen as a significant competitive presence to other buyers and sellers of real estate investments. Plus, the weight of capital in the more attractive markets may affect pricing and risk-adjusted returns.
NBIM, as stated before, plans to increase the number of staff dedicated to real estate to approximately 200 professionals. Regardless of the number of staff dedicated to an investment strategy, the ability to manage information between team members and coordinate intelligence-gathering is critical. While investors continue to seek ways to automate paper-based processes and access broader data, they are also looking for ways to quickly and efficiently distribute updates within their own organizations, no matter how small or large. Accordingly, transparency and communication is the hallmark of the most adept fund managers. Today, cleverly designed technology infrastructure can go a long way in supporting highly effective investors and investment managers.
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