NORWAY - Property is becoming an increasing focus for pension funds in Norway as they seek to further diversify their portfolios, following a change to regulations earlier in the year.
The decision, which was made as part of its regular investment strategy review, would mean up to 5% of the fund's capital could be invested in real estate, which would be offset by a reduced allocation to fixed income investments.
Catrine Gjedebo, partner at Nordic consultancy, Wassum, said most of the pension funds did not have the expertise and resources to invest directly, but it had seen an increase in property investments, along with the introduction of several property funds in the Norwegian markets.
She said: "Pension funds tend to start investing in Norwegian or Nordic property, and then expand further outside the Nordic region."
She also noted there were strict regulations investors faced in Norway, but said if a property fund was not leveraged, investors were free to invest broadly, up to the 10% limit per fund as set out in regulations introduced earlier this year.
She said problems arose when property funds were leveraged, which meant, under current legislation, only 1% of the pension funds total portfolio could be invested in each fund, as it would be grouped into the alternatives allocation, which has a maximum of 7% allocation of the whole fund. There are also still limits for diversification of direct property portfolios.
She said: "There has to be a big discussion to look into the funds to see how they are structured. The new regulation is a little unclear and there are different interpretations on how the limits apply for the different property investment vehicles."
Rolf Skomsvold, general secretary at the Association of Norwegian Pension Funds (NPF), said: "Buildings and property have become more popular, mostly in Norway but also abroad."
He said the rise of real estate funds had made it easier for smaller funds to invest in property. "Many pension funds do not have the time, money and people to go out and buy an office block," he said.
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The Pensions Regulator (TPR) has exercised its production order power under the Proceeds of Crime Act 2002 for the very first time as part of a fraud investigation.
The ITN Limited Pension Scheme has named Trafalgar House as its administrator for an initial term of five years.