LONDON, Feb. 21, 2013 /PRNewswire/ -- James Navarro de Paz begins his news item on property investment by quoting a study undertaken by the Sovereign Investment Lab (SIB) at Bocconi University in Milan, which shows that in 2012 a record portion of sovereign wealth fund investments were in real estate assets, bringing some diversification to the typical portfolio mix of stocks and bonds.
De Paz continues by observing that the SIB report records a total of 38 property investments valued at around $10 billion (₤6.37 billion) in 2012. Although the total size of the investment is below the $13.4 billion (₤8.54 billion) achieved two years ago, it comprises a record 21 percent of the investments made by sovereign wealth funds last year. The iNVEZZ news piece quotes Andrew Rozanov, head of sovereign advisory at Permal Investment Management Services, who observes that the low yields of bonds and high volatility in the stock market have turned real estate assets into an attractive investment alternative. Rozanov points out that a property investment doesn't just help diversify a portfolio, also it also protects against inflation.
The iNVEZZ author gives a couple of examples of sovereign wealth funds which have made large forays into real estate assets. Notably, the Government Pension Fund Global (GPFG) of Norway, the world's biggest state-backed fund with $703 billion (₤448 billion) in assets under management, last year made its first property investment, an office complex in Switzerland. GPFG bought the complex for one billion Swiss francs (₤694 million) from Credit Suisse Group AG in November. And on 11 February, the Norway wealth fund announced the acquisition of a 49.9 percent stake in five office buildings on the US East Coast for $1.2 billion (₤765 million). In addition to Switzerland and the US, GPFG has acquired property investments in London, Paris, Frankfurt and Berlin, and even in Sheffield, England, with a focus on conservative investments such as large office complexes and shopping malls.
According to the iNVEZZ piece, property investment was also high priority in 2012 for the China Investment Corporation (CIC) and Azerbaijan's State Oil Fund (Sofaz). The Chinese sovereign wealth fund purchased Winchester House, leased by Deutsche Bank as its London headquarters, from KanAm Grund KAG in the second half of 2012. The fund has said that it intends to continue buying properties in London as a means of reducing its reliance on US debt. Sofaz purchased a West End London office building complex for ₤177 million in December 2012. Meanwhile, the Azerbaijani fund's chief executive, Shahmar Movsumov, has said that he is looking into property investment opportunities in China and Australia during the current year.
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