Norges Bank has said it is “not satisfied” with the returns of the Government Pension Fund Global’s (GPFG) real estate portfolio, in a letter to the Norwegian Ministry of Finance.

In a letter sent earlier this month, which was requested in June as part of a review of the management of the fund, it said it is “not satisfied with the results in real estate management and is now making changes to the strategy for real estate”.

The review is an “established practice” and will be presented in the annual report to parliament (Storting) on the management of the GPFG in spring 2026. Much of the information set out in the letter is based on information that Norges Bank already shares publicly.

Norges Bank acknowledged that the real estate portfolio has delivered weaker returns than the equities and fixed income investments it has sold to finance the investments.

“The results must be seen in the context of major changes in the market since we began investing in real estate. Traditional sectors such as office and retail have been significantly changed as a result of the emergence of working from home and online shopping,” it stated.

“The bank's strategic choices, including a strong emphasis on traditional sectors, a limited number of countries and cities, and an emphasis on direct investments, have resulted in a portfolio that has been vulnerable to these changes.”

As a result, it has set out a new real estate strategy that will see a shake-up of the geographical composition of the portfolio and more indirect real estate investments.

“Going forward, the portfolio's geographical composition will follow from assessments of individual transactions and sectors, and will not be limited to predetermined countries and cities,” the letter said.

“Historically, we have placed great emphasis on direct investments, which require in-depth local knowledge and a high degree of specialisation. The number of markets and sectors we can cover internally is therefore limited. Direct investments with partners will continue to be an important part of the real estate strategy, but in the work on a new strategic plan, we will also assess the possibilities for a gradually larger element of indirect investments.”

It stated that indirect investments provide “resource-efficient” access to specialist expertise and “operational capacity” that it is not appropriate to build up internally.

Furthermore, it has also set out a change to the financing of real estate investments. It plans to establish a new framework, where the equity share will be more closely aligned with the underlying risk of each real estate investment.

“Investments in well-established sectors with low vacancy rates will have a lower equity share, while projects with a need for operational involvement, in newer or emerging sectors or with elements of development risk will have a higher equity share,” it explained.

More broadly, Norges Bank is “satisfied” with the overall performance and management of the GPFG. It noted that the returns for the fund overall have been good over time, and higher than the returns on the benchmark index against which the management is measured.

“Norges Bank's assessment is that the management has been carried out in a sound manner. The Executive Board emphasises that results in the management must be assessed over time,” Norges Bank stated in its letter.

In addition, it detailed how it has placed a great emphasis on transparency in the management of the fund.

“Norges Bank places great emphasis on transparency about the management of the fund. Transparency about historical results can strengthen the ability to stick to long-term strategies, also in periods of market turmoil.

“Evaluations of historical results also play an important role in the further development of our strategies for managing the fund with the goal of achieving the highest possible return given acceptable risk, within the limits set by the Ministry of Finance,” it stated.

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