Norway鈥檚 sovereign wealth fund has written down the value of its UK property holdings by 5% following Britain鈥檚 vote to leave the European Union, citing market uncertainty.
The Government Pension Fund Global has significant exposure to UK property, with 16% of its NOK221bn (鈧�23.6bn) real estate portfolio in London and 23% in the UK 鈥� over twice its exposure to French property.
Norges Bank Investment Management (NBIM) said in its second-quarter report that the fund鈥檚 external valuers decided against any changes to the UK portfolio鈥檚 value, as there was a shortage of data on the impact of .
But NBIM decided to writedown the values of its UK property assets by 5%.
鈥淭he increased volatility and uncertainty in the market are assumed to have a negative effect on property values,鈥� NBIM said.
鈥淭he fund has therefore decided to adjust down the estimated value of the property investments in the UK from external valuers by 5% as at 30 June.鈥�
The writedown resulted in its unlisted real estate holdings posting a negative return (-1.6%) during the second quarter, while listed holdings fell by 0.9% over the same period.
Although rental income returned 0.9%, the writedown鈥檚 overall impact saw real estate produce a -1.4% return, below both the sovereign fund鈥檚 equity holdings (0.7%) and its fixed income holdings (2.5%).
Trond Grande, NBIM鈥檚 deputy chief executive, said the three months to June only saw the strong fixed income returns due to rate cuts across the globe.
鈥淎fter a period of relatively stable markets at the beginning of the quarter,鈥� Grande continued, 鈥渢he British decision to leave the EU sparked a sharp decline in Europe.
鈥淢arkets recovered relatively quickly, but with major variations between sectors,鈥� he added.
Despite writing down the value of its UK portfolio, NBIM remains interested in the market, and acquired a central London property in the weeks after the Brexit vote.
The sovereign fund as the UK manager was struggling with the liquidity of its flagship open-ended property fund.
Nearly half of the NOK7.2trn sovereign fund鈥檚 UK property was office space at the end of June, with 38.4% in retail, 14.2% in logistics and 1.6% in unspecified other sectors.
