* Wealth fund earns 7.2 pct return on investment in Q3
* Says profit was fifth best in fund's history
* Launches real estate investment with $719 mln London buy
* Most real estate activity seen in UK in 2011
(Adds details, quotes)
By Camilla Knudsen and Wojciech Moskwa
OSLO, Nov 4 Norway's sovereign wealth fund (SWF)
said it earned $34 billion on its investments in the third
quarter as stock markets rallied, and picked a prime central
London retail site for its first ever real estate purchase.
The $500-billion-plus SWF, the world's second largest behind
its peer in the United Arab Emirates, agreed to buy a 25 percent
stake in the UK Crown Estate's Regent Street properties for 448
million pounds ($719 million).
"Better-than-expected earnings figures from a range of
companies and reduced fears of an economic slowdown in Europe
contributed to the stock market rally," said Yngve Slyngstad,
chief executive of Norges Bank Investment Management (NBIM).
"Concern over some southern European countries' sovereign
debt also eased somewhat."
In line with preliminary data, the value of the central
bank-run fund stood at 2.91 trillion Norwegian crowns ($503.5
billion) on Sept. 30, up from 2.79 trillion at end-June. The
fund has since topped 3 trillion crowns, Norway has said.
The third-quarter return on investment stood at 7.2 percent,
about 0.4 percent above the fund's benchmark portfolio. About
60.4 percent of the fund was allocated in stocks, against 59.6
percent at the end of the second quarter.
About 70 percent of the new capital inflows to the fund,
which is fed by Norwegian tax revenues from oil and gas
operations, went to bond purchases with the rest to equities.
NORWAY IN REGENT ST
The Regent Street acquisition is the first property
investment for the fund, which was cleared in March to invest up
to 5 percent of its assets in property through a corresponding
decrease in debt investments. The fund now holds up to 40
percent of total assets in debt.
The fund said it planned to invest mainly in unlisted real
estate, well-developed markets and traditional property types,
initially in Europe and in major cities.
"Much of the real estate activity in 2011 will be in Britain,
but we also have begun to look at France and Germany," Slyngstad
told reporters, adding the fund would not look at investing in
U.S. real estate before 2012 or 2013.
The Regent Street portfolio consists of 113 buildings owned
by the Crown Estate, on behalf of Britain, in one of London's
main shopping districts.
In February, Crown Estate said it was considering bringing
third parties into plans to develop its 1.4-billion-pound
The Norwegian government has often been at odds with Norges
Bank over the fund's investment profile, with bankers seeking to
keep the SWF focused on financial profits.
The SWF said oil major BP (BP.L) -- whose Macondo well blew
out in the Gulf of Mexico in April, leading to the worst-ever
oil spill -- was its most profitable investment in the quarter.
In the second quarter BP was the worst performer.
Some other top performers in the fund were Spanish telecom
company Telefonica (TEF.MC) and oil major Royal Dutch Shell
(RDSa.L). The worst third-quarter performers were U.S. banks
Wells Fargo (WFC.N) and Bank of America (BAC.N) together with
Swiss drugmaker Roche ROG.VX.
Slyngstad further suggested the fund would maintain some 350
billion crowns in assets under external management, even though
the size of the fund is growing.
Norges Bank has said Norway should consider scrapping a
regional allocation weighting system for the fund, which
currently favours investments in Europe. If scrapped, the fund
would invest more in the Americas and in Asia.
(Editing by John Stonestreet)
($1=5.779 Norwegian Crown)