EUROPE NEWS: Norway’s wise men

The $300 billion sovereign wealth fund has set up an advisory board to play ‘devil’s advocate’ on investments In these days of risk control, it is unsurprising that a large European sovereign wealth fund has just set up an advisory board to vet property investments. PERE Magazine September 2010

In these days of risk control, it is unsurprising that a large European sovereign wealth fund has just set up an advisory board to vet property investments.

Norway’s $300 billion Government Pension Global Fund, which in March received the go-ahead to start investing up to 5 percent of its portfolio in the asset class for the first time, has created the board for its real estate team to “consult with”, according to spokesman Øystein Sjølie.

“The board is a consultant organ for the investment decision makers. It is not going to make decisions, but when the investment team has a concrete proposal, they will present it to the board, which will try to play devil’s advocate,” said Sjølie.    

He added: “It is about risk control. The investments we make in the sector will be big, so decisions need to be talked and thought through.”

Sjølie said it was not uncommon for sovereign wealth funds to have advisory boards, citing the Government of Singapore Investment Corporation (GIC).

Abu Dhabi Investment Authority is one sovereign organisation that does not have a real estate advisory board, however, but unlike Norway it has hired a large number of real estate investment professionals.
The chairman of Norway’s real estate advisory board is Bengt  Enge, chief investment officer at Norges Bank Investment Management (NBIM), which manages the Norwegian Government Pension Fund Global.

It has two external members on it in a part-time capacity. The first is Andrew Strang, a well-known figure in UK property having been chairman of Threadneedle Property Investments until April 2009. Strang is also a consultant to Hermes Real Estate, the pension fund manager of UK telecoms group BT.

Norway’s other member is Mark Burton, the former real estate chief investment officer at ADIA and its neighbouring fund, the Abu Dhabi Investment Council (ADIC).

All eyes will now be on the state pension fund after it was given the go-ahead in March to invest up to $20 billion in real estate. Some of that capital will be invested in direct property, equities and joint ventures, but investments in real estate fund partnerships are also envisaged.

Karsten Kallevig is leading Norway’s real estate investment team and is due to start his role this month (1 September), joining from Grove International Partners.

In a recent press conference in Oslo, NBIM said it was already closing in on its first real estate investments, and that they were likely to be made in the UK.

The Government Pension Fund Global has not enjoyed the best of times lately in its other investments. It returned –5.4 percent in the second quarter this year, blaming Europe’s stock markets for the decline. The Norwegian fund has invested roughly half of its equities portfolio in the region, where the single worst performer was oil giant BP following its disastrous oil spill in the Gulf of Mexico.   

Norway is also reducing fixed income investments in order to elevate real estate, which will be spread over time and invested mainly in unlisted real estate, well-developed property markets and traditional property types, initially in Europe.