The fund is gradually increasing real estate investments to as much as 5 percent of its assets through a corresponding decrease in its bond holdings.
The move spreads the fund’s risk across more markets and can also protect against inflation as rents are often linked to price indices.
Real estate investments were initially in well-developed European markets and properties such as offices and retail premises. From 1 January 2013, the mandate to invest in real estate was broadened to include countries outside of Europe. The fund seeks to invest with partners that have good knowledge of specific markets.
The fund’s real estate investments are generally made through Norges Bank subsidiaries to limit liability to a subsidiary’s capital. This is standard market practice and supports the bank’s goal of safeguarding the fund’s assets through prudent risk management. Norges Bank in May 2011 set up the subsidiary NBIM S.à r.l. in Luxembourg. Many of the fund’s real estate investments in mainland Europe will be channelled through the subsidiary, which will hold stakes in entities investing directly or indirectly in properties. The subsidiary’s responsibilities also include accounting, bookkeeping and transferring of rental income to Norges Bank.