By CATHERINE BOYLE
EUROPE’S largest pension fund is about to spend as much as £20bn (E30bn, $40bn) on global commercial property, including UK assets, in the latest sign that governments are emerging as leading global investors.
The Norwegian Government Pension Fund, fuelled by sizeable revenues from oil reserves, has amassed a sum of E220bn but has previously been banned from investing in real estate. This is set to change as Norway’s finance ministry is due to revise this rule later this year.
In May the fund hired Paul Golding, a former real estate investment banker from Merrill Lynch, in anticipation of this change. Sources say Golding has been sounding out his contacts in the City of London about investment opportunities in Europe, including ones in the UK, and that he will have up to £20bn to invest once Norway’s government endorses the plan.
The fund takes a strict ethical stance on investments, and has blacklisted 21 companies over non-compliance of its principles. It refuses to back companies which specifically make cluster bombs or nuclear weapons, including General Dynamics, Lockheed Martin and Boeing, the defence giants. Last year, it controversially sold off more than $400m worth of shares in Wal-Mart, the US-based retailer, and added the supermarket giant to its blacklist, for a number of reasons including the company’s union relations.
In April, Norway’s ministry of finance published a white paper which proposed that the fund, which can only invest outside Norway, increase its exposure to global equity and alternative asset classes. The move towards investing in real estate is understood to have come out of this white paper.
The pension billions originated from a Petroleum Fund set up in 1996 to put aside some of the country’s oil wealth for future generations. In 2005 it became the Norwegian Government Pension Fund – Norway is the third largest exporter of oil in the world, after Saudi Arabia and Russia, and pumps 3m barrels of oil from the North Sea each day.
It now has equity invested in more than 3,500 companies, with around half of its holdings in Europe and about 30% in the US. It is managed by Norges Bank Investment Management, which declined to comment on its plans.
A spokeswoman for NBIM confirmed that the fund was “preparing” to invest in real estate but said that it was “too early” to put a figure on the size of the investment as they were still waiting for the Norwegian parliament’s decision.
