Sovereign Wealth Funds Pursue Institutional Real Estate

Posted on 06/25/2013

Ever since the end of 2010, direct sovereign wealth fund transactions in institutional real estate have risen. Larger sovereign funds tend to take on direct investment opportunities, while public investors under US$ 30 billion in assets rely heavily on real estate funds. Sovereign wealth funds with renewed confidence are investing directly into core real estate, creating competition among pension funds, REITs and real estate fund managers. Quantitative easing has demolished interest rates, making real estate assets particularly attractive. Risk-averse sovereign funds favor major European and American cities in prime markets, especially when investing without real estate fund managers.

Sovereign wealth funds are enhancing allocation to real estate.

Traversing up the risk spectrum, some sovereign wealth entities like Qatari Diar have mandates to partake in co-investment developmental projects. CityCenterDC and Hudson Yards are two major developmental projects in the Eastern United States where Gulf government investors have allocated capital.

Direct Sovereign Wealth Fund Transactions – Real Estate – Billions in USD – Click to Enlarge Graphic
Source: Sovereign Wealth Fund Transaction Database

According to data from the Sovereign Wealth Fund Transaction Database, 2012 was a noteworthy milestone for direct sovereign fund real estate transactions touching US$ 15.13 billion. Norway’s Government Pension Fund Global had a major impact on the figure, choosing to go direct versus allocating purely to commingled real estate funds.

2013 results are over US$ 5 billion so far.

Keywords: Norway Government Pension Fund Global, Qatar Investment Authority.