Norges posts returns drop
Returns on Norges’ real estate investments
UK real estate returned -16.9% in 2016 for Norges Bank Investment Management, the world’s biggest sovereign wealth fund, as its total real estate returns fell from 10% to 0.8%.
The £721bn global pension fund, which holds £23bn in direct and listed real estate, decreased its property portfolio’s exposure to UK real estate from 26.3% in 2015 to 22.9%.
Returns on Norges’ real estate investments
Since March 2011
2016
2015
2014
2013
2012
Rental income (percentage points)
4
3.7
4.1
4.4
4.6
4.2
Change in value (percentage points)
3.5
0.7
6.7
7.1
3.8
0.4
Transaction costs (percentage points)
-1.5
-0.2
-0.2
-0.8
-0.4
-0.6
Result of currency adjustments (percentage points)
0
-2.5
0.1
-1
3.8
1.8
Direct real estate investments (%)
6
1.7
10.8
9.6
11.8
5.8
Listed property (%) (from 2014)
5.2
-2.3
7.8
6
–
–
Total return (%)
5.8
0.8
10
10.4
11.8
5.8
UK real estate returned -16.9% in 2016 for Norges Bank Investment Management, the world’s biggest sovereign wealth fund, as its total real estate returns fell from 10% to 0.8%.
The £721bn global pension fund, which holds £23bn in direct and listed real estate, decreased its property portfolio’s exposure to UK real estate from 26.3% in 2015 to 22.9%.
Despite this, the UK was still Norges’ second-biggest market, behind the US at 49.9%, and ahead of France at 14.8%.
Among its biggest investments last year were 355-361 Oxford Street and 73-89 Oxford Street, both W1, which it bought for a combined £400m.
Direct real estate holdings performed better than listed ones, with returns of 1.7%, or 4.2% in local currency.
Norges’ direct real estate investments make up 2.5% of its portfolio, or 3.2% including its listed real estate holdings – up from 3.1% last year. However, from 2017 onward, it will report listed real estate as part of its equity portfolio, rather than real estate.
Speaking to EG at the end of last year, Kristen Kallevig, chief executive of Norges Bank Real Estate Management, said the fund could pump up to $34bn (£27bn) into property over the next five years, taking its exposure to the industry to 5% of its market value.
Norway’s Ministry of Finance restricted the fund’s direct property portfolio to 7% of its total investment value, as of the beginning of the year.
Although property returned 0.8%, the fund as a whole had a return of 6.9%, bolstered by an 8.7% return in equity investments, which make up 62.5% of the fund, and 4.3% in fixed-income investments.
In the annual report, Norges said its experience of investing in real estate had been “positive to date”, noting that despite lower performance this year, the annual return for direct property has averaged 6% since 2011.
• To send feedback, e-mail karl.tomusk@estatesgazette.com or tweet @ktomusk or @estatesgazette
