By most accounts, the Norwegian Sovereign Wealth Fund (“NSWF”) is one of the lar
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By most accounts, the Norwegian Sovereign Wealth Fund (“NSWF”) is one of the largest of its kind. At present, it has about $900 billion (not million) in total assets. Throughout most of its existence, the fund had a ZERO % allocation to real estate, meaning that it had absolutely no direct or indirect real estate assets in its investment portfolio. In 2010 NSWF changed its overall asset allocation by allowing real estate investments for the first time. The maximum real estate allocation was set at 5% of total assets. Market conditions permitting this target allocation was deemed to be reachable within 6 years (i.e. at the end of 2016).
The fund’s CIO (Chief Investment Officer) had considerable experience in fixed-income and equities investing but no real estate expertise whatsoever. Nonetheless, she was instructed to design and implement the new strategy. The CIO hired you, a recent graduate from GU SCS’s esteemed real estate program, to devise a strategy implementable within the time frame provided.
Put yourself into the year 2010 and outline the limiting factors for achieving the fund’s goals (of a 5% allocation by end of 2016).
In your response, consider the following:
1. What kind of staffing levels will the strategy you recommend require?
2. 5% of $900 billion equates to $45 billion. How many individual assets will $45 billion buy?
3. Will you recommend “direct” or “indirect” investing (or something in between)?
4. Is the Norwegian real estate market large enough to accommodate $5 billion, $10 billion, or even $45 billion in fresh new investment money?