* Fund CEO-green energy, transport, grids may be considered
* C.bank-fund should be allowed to invest in infrastructure
* C.bank-fund should be allowed to invest more in real
* Fund currently invests in stocks, bonds and real estate
(Recasts with comments by fund's CEO, think tank head, detail)
By Geert De Clercq and Gwladys Fouche
PARIS/OSLO, Dec 8 Norway's $850 billion
sovereign wealth fund, the world's largest, would invest in
renewable energy, transport and grids if it were allowed to put
money into unlisted infrastructure projects, the fund's CEO told
Reuters on Tuesday.
His comments came after the Norwegian central bank
recommended the fund should be allowed to invest in such
projects and to put a higher share of its assets in real estate,
changes that could represent the biggest shift in the fund's
strategy since it was allowed to invest in real estate in 2010.
"From our point of view the focus will be on the energy
transition, renewable energy," Yngve Slyngstad said in an
interview on the margins of the Paris global climate talks, when
asked what kind of infrastructure projects the fund could
Slyngstad said the "usual suspects" of the transport sector
and grids could be targeted too.
The fund is currently allowed to invest about 60 percent of
its value in stocks, 35 percent in bonds and has an upper limit
of five percent for real estate.
It can invest in companies involved in infrastructure
projects, but it cannot take a direct stake in a project that is
not listed on the stock exchange.
But it should be allowed to invest up to 5 percent of its
value in unlisted projects and raise its stake in property to a
range of 5-15 percent, the central bank said in letters to the
finance ministry dated Nov. 25, Nov. 26 and Dec. 2 and published
on the ministry's website on Tuesday.
The bank also recommended changes to how the fund's
performance is measured, as more unlisted assets would make its
current use of stock and bond index models less suitable.
The fund is managed by Norges Bank Investment Management,
part of the central bank.
The central bank's recommendations will be reviewed by the
finance ministry, which will make its own recommendations in a
white paper in April. Parliament will then discuss the white
RISKY REAL ESTATE?
A group of foreign experts appointed by the Norwegian
finance ministry said in a separate recommendation on Tuesday
that the fund should be allowed to invest up to 10 percent of
its assets in infrastructure, including in emerging markets and
But the group, headed by New York University Professor Stijn
Van Nieuwerburgh, said there was no compelling reason for a
sharp increase in allocation to real estate.
The Norwegian wealth fund has concentrated its property
portfolio around leading global cities including London, Paris,
New York, Boston, Washington D.C. and San Francisco, and has
said it soon plans to enter Tokyo and Singapore.
"Current valuation and risk levels of real estate assets,
especially for core assets in top-tier gateway cities, seem
elevated compared to historical pricing," the expert group said.
"We recommend caution for new real estate investments."
An independent observer of the fund, who heads think tank
Re-Define, welcomed the central bank's recommendation on
infrastructure but said that increasing exposure to real estate
investments was too risky.
"On infrastructure, that is very promising," Sony Kapoor,
managing director of Re-Define and author of a 2013 study on the
"Investing in infrastructure is one of the most promising
ways to unlock growth potentials," he told Reuters, citing the
need to replace ageing infrastructure in mature economies and
building new ones in emerging markets.
Because of this, the fund should be allowed to invest up 25
percent of its value in infrastructure, he said, adding that the
fund should not be allowed to invest up to 15 percent in
property, but between 5 and 10 percent.
"My concern about real estate is that real estate markets
... are among the most distorted markets in the world," Kapoor
said. "The real estate sector has been implicated in the world's
major financial crises."
(Additional reporting by Terje Solsvik in Oslo, editing by
David Evans and Jane Merriman)