Norway’s Global Government Pension Fund, the biggest sovereign wealth fund in the world by assets under management, has performed a major reversal on its views of Britain’s property market just over a month after sounding the alarm over Brexit concerns.
The fund has revised up the value of its UK property portfolio, having previously cut that value by around 5% after citing challenges about how “to value unlisted properties in the UK market.”
However, now that the dust has started to settle somewhat in the aftermath of the vote, the fund’s deputy chief executive Trond Grande says that the value of Norway’s UK property portfolio has been marked back up to a level close to where it was prior to the vote, according to the Financial Times. “We feel more secure with the valuation than we did at the end of the second quarter,” he said.
The Norwegian fund, perhaps surprisingly, is a major landowner in London’s West End, owning large swathes of property, including around 25% of popular shopping street Regent Street. The fund also owns parts of New Bond Street, properties on Savile Row, the street famous across the world for its tailors, as well as half of Sheffield’s Meadowhall shopping centre.
Soon after Britain voted to leave the European Union, the fund argued that in the immediate aftermath of the vote to leave, when assets were crashing and a mild panic gripped the markets, valuing properties in the UK became substantially more difficult. That uncertainty meant that valuations proved tricky to undertake for funds. As a result, Norway decided to decrease the book value of its holding in UK property by 5%. Essentially, the fund thought that its UK properties were worth 5% less than they were before the referendum.
That decision was part of a wider fear in the property markets, with numerous property funds in the UK freezing withdrawals. At one point in early July, £15 billion, out of a total of £24 billion sunk into UK open-end real estate funds, were frozen.
However, as the property market seems to have held up pretty strongly so far in the aftermath, Norway is now happy to mark its values back up again.
Speaking to the FT, Grande said that the Norwegian fund is not taking an official line on Brexit and its possible outcomes, saying: “We don’t have a view on . . . the isolated effect on the UK.”
Grande did however, say that he does not expect Brexit to have a big impact on its UK assets, given that most of its property is in the West End, and not connected to financial sector-focused parts of London like the City, and Canary Wharf. “So, for us, we don’t really see that we have a very big exposure to Brexit in our real estate portfolio in the UK,” he said.