Norway’s huge SWF to raise frontier markets exposure

25 June 2014   Category: News, Global, Europe, Norway   By Daniel Shane

Norway’s huge sovereign wealth fund (SWF), the largest in the world with around US$880 billion in AUM, will seek to raise its exposure to frontier markets and alternative asset classes over the next three years.

Norges Bank Investment Management (NBIM), which is responsible for investing the Scandinavian country’s surplus oil receipts, said in a strategy report that “new frontier markets will be added to our equity investments”, as it seeks to “exploit time-varying investment opportunities”.

The 2014-2016 strategy document, published on NBIM’s website, also said that the fund will look to increase the scope of its investments in environmental portfolios, as well as listed real estate and infrastructure. It will also seek to “further develop its funding structure [for] absolute return strategies”.

In terms of real estate investments, NBIM said it will focus on opportunities in New York, Washington DC, Boston and San Francisco, as well as potential investments in London and Paris. The SWF will also “consider investment opportunities in global cities outside of Europe and the US”. To date, NBIM has primarily invested in real estate via joint ventures, but said it will now look to take a more active role in management and development of these assets.

NBIM, which allocates 60% of its portfolio to equities, said that it expects to dish out 100 external mandates in this asset class between now and 2016. The share of its portfolio that is managed by external fund managers is targeted at 5% as its investments in emerging markets rise.

In addition to its stock holdings, NBIM currently allocates 35% to 40% in fixed income, and a maximum of 5% in alternatives. The investments are spread globally outside of Norway.

In 2013, the fund returned 15.9%, primarily on the back of resurgent global equities markets.