24-06-2014, 06:17 PM
June 24 (Bloomberg) -- Norway’s $880 billion wealth fund,
the world’s largest, will expand its scope of investments to
target “frontier markets” and add more currencies to generate
higher returns.
The fund will broaden its “exposure to different sources
of return and seek to exploit time-varying investment
opportunities,” Norges Bank Investment Management, which
manages the fund, said in a strategy report published today.
NBIM expects to invest 1 percent of the fund in private real
estate in each of the next three years, it said.
“New frontier markets will be added to our equity
investments, and the scope of our fixed-income investments will
be widened to include additional currencies,” NBIM said in the
report, which sets its strategy through 2016.
Frontier markets, also called pre-emerging markets, have
equity markets that are less established than in emerging
markets. These include countries such as Argentina, Ukraine and
Kazakhstan, according to MSCI Inc. The MSCI Frontier Market
Index is up 16 percent this year compared with a 5 percent gain
for the MSCI World Index of developed market shares.
The fund, which owns 1.3 percent of the world’s equities,
has returned less than 4 percent on average since it started
investing in the late 1990s. Norges Bank Governor Oeystein
Olsen, who oversees the fund, has said it must take on more risk
to increase returns. In addition to infrastructure and private
equity, he advocates increasing stock holdings to 70 percent
from the current 60 percent limit.
Plug Deficits
It will also increase the number of employees to about 600
from 370 now, mostly outside Norway, including 200 for its real
estate division, the fund said today.
The goal of a 4 percent real return over time will be
“better served if a larger share of the fund is invested with
the global economy,” the fund said. NBIM will “prepare the
organization for a change in this direction,” it said.
The fund is allowed to hold 35 percent in bonds and 5
percent in real estate. Since being freed to expand into the
property market in 2011, the asset class makes up about 1
percent of its total portfolio.
Larger Stakes
The fund is looking to expand into real estate in Asia and
reiterated its interest in “global cities outside Europe and
the U.S.” While real-estate investments from London to San
Francisco have mostly taken the form of joint ventures, the fund
is now preparing to manage fully-owned properties with a more
active role in development, it said.
“Larger ownership stakes in listed real-estate companies
and public-to-private transactions will be considered,” the
fund said.
Norway, western Europe’s biggest oil and gas producer,
channels its petroleum income into the wealth fund to shield the
$500 billion economy from overheating. The fund got its first
capital in 1996, added stocks in 1998, emerging markets in 2000
and real estate in 2011. The government is allowed use the
targeted 4 percent return to plug budget deficits.
the world’s largest, will expand its scope of investments to
target “frontier markets” and add more currencies to generate
higher returns.
The fund will broaden its “exposure to different sources
of return and seek to exploit time-varying investment
opportunities,” Norges Bank Investment Management, which
manages the fund, said in a strategy report published today.
NBIM expects to invest 1 percent of the fund in private real
estate in each of the next three years, it said.
“New frontier markets will be added to our equity
investments, and the scope of our fixed-income investments will
be widened to include additional currencies,” NBIM said in the
report, which sets its strategy through 2016.
Frontier markets, also called pre-emerging markets, have
equity markets that are less established than in emerging
markets. These include countries such as Argentina, Ukraine and
Kazakhstan, according to MSCI Inc. The MSCI Frontier Market
Index is up 16 percent this year compared with a 5 percent gain
for the MSCI World Index of developed market shares.
The fund, which owns 1.3 percent of the world’s equities,
has returned less than 4 percent on average since it started
investing in the late 1990s. Norges Bank Governor Oeystein
Olsen, who oversees the fund, has said it must take on more risk
to increase returns. In addition to infrastructure and private
equity, he advocates increasing stock holdings to 70 percent
from the current 60 percent limit.
Plug Deficits
It will also increase the number of employees to about 600
from 370 now, mostly outside Norway, including 200 for its real
estate division, the fund said today.
The goal of a 4 percent real return over time will be
“better served if a larger share of the fund is invested with
the global economy,” the fund said. NBIM will “prepare the
organization for a change in this direction,” it said.
The fund is allowed to hold 35 percent in bonds and 5
percent in real estate. Since being freed to expand into the
property market in 2011, the asset class makes up about 1
percent of its total portfolio.
Larger Stakes
The fund is looking to expand into real estate in Asia and
reiterated its interest in “global cities outside Europe and
the U.S.” While real-estate investments from London to San
Francisco have mostly taken the form of joint ventures, the fund
is now preparing to manage fully-owned properties with a more
active role in development, it said.
“Larger ownership stakes in listed real-estate companies
and public-to-private transactions will be considered,” the
fund said.
Norway, western Europe’s biggest oil and gas producer,
channels its petroleum income into the wealth fund to shield the
$500 billion economy from overheating. The fund got its first
capital in 1996, added stocks in 1998, emerging markets in 2000
and real estate in 2011. The government is allowed use the
targeted 4 percent return to plug budget deficits.