Norway's Government Pension Fund-Global, Oslo, may soon begin investing up to 130 billion Norwegian kroner ($22 billion) in global real estate, Norway's Ministry of Finance announced March 1.
Also last week, the ministry added rules on active ownership to the fund's ethical investment guidelines.
On March 1, the ministry laid out investment restrictions on how the 2.59 trillion kroner fund's previously announced 5% allocation to real estate might be implemented, including that investments be diversified geographically, by sector and over different types of instruments, and that they be phased in over “several years,” according to regulations posted on the ministry's website. The fund could use external investment managers and instruments such as direct real estate funds or real estate-based derivatives.
“Investments will principally be made in well-developed markets and within traditional types of real estate. Even so, we must be prepared for real estate prices to fluctuate a good deal,” Minister of Finance Sigbjorn Johnsen said in a related news release.
The ministry will require Norges Bank, which manages the fund's assets through subsidiary Norges Bank Investment Management, to create quarterly and annual reports, and to set ceilings in areas such as how much in assets a single external manager may run or the real estate portfolio's total debt ratio.
The new ethical investment guidelines give ministry officials more leeway before they ban investment in a company, according to a separate news release.
“In some cases, it is more useful to put a company under observation than to exclude — for example, if there is uncertainty about how the situation will develop,” Mr. Johnsen said in the release. “We monitor the companies that have been placed on this watchlist closely to see if they implement measures to remedy the situation before we make a final decision on whether to exclude the company.”
The ministry also withdrew its ban on investing in United Technologies Corp., which was excluded from the fund's investment universe in January 2006 because it manufactured nuclear weapons, the ministry said in a separate release.
Ministry officials determined that United Technologies no longer updates nor tests engines used by the U.S. government in its intercontinental ballistic missile program. n