Norway’s Pension Giant Bulks Up Boston Commercial Real Estate Holdings

The $1.44 trillion Government Pension Fund Global has been investing in office real estate in the area since 2013.



Norges Bank Investment Management, which manages Norway’s $1.4 trillion Government Pension Fund Global, has added to its Boston-area real estate holdings with the recent acquisition of a 45% stake in two life sciences properties in Cambridge, Massachusetts, in a joint venture with Boston Properties Investment Management.

NBIM paid Boston Properties $746.4 million for the stake, which values the properties at approximately $1.66 billion combined. Boston Properties will retain the remaining 55% stake and will manage the properties on behalf of the joint venture.

The two life sciences properties, which will comprise a total of approximately 810,000 square feet when completed, are 100% pre-leased to pharmaceutical giant AstraZeneca plc and the Broad Institute of MIT and Harvard.

“We are very pleased to grow our portfolio in Greater Boston,” Mie Holstad, NBIM’s chief real assets officer, said in a statement. “The investment aligns with our long-term strategy, and we are delighted to strengthen our partnership with BXP in a sector where we have high conviction.”

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The Norwegian pension giant has been investing in Boston-area commercial real estate for more than a decade, having made its first foray into U.S. real estate in early 2013. At the time, the GPFG acquired 49.9% of five office properties in Boston, New York and Washington, D.C., from TIAA-CREF for approximately $1.2 billon. The pension fund had only begun investing in real estate in 2011, when it bought retail properties in London and Paris.

Later in 2013, NBIM formed a joint venture with MetLife to invest in U.S. office properties. The joint venture’s initial investment was One Financial Center in Boston, and NBIM paid $238 million for its 47.5% stake. In 2018, Norges Bank Real Estate Management acquired a 45% stake in a Boston office property in a joint venture with American Realty Advisors for $204.8 million. A few months later, it paid $290.9 million for a 49.9% interest in a mixed-use office and retail property on Boston’s Boylston Street.

In 2021, NBIM paid $391.9 million to buy a 47.5% interest in an office property in Cambridge in a joint venture with MetLife. Later that year, it paid $485.9 million for a 41% share of life science properties in Boston and Cambridge through a joint venture with MetLife subsidiary Alexandria Real Estate Equities.

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NYC Pensions Increase Allocation to Emerging Managers Following Outperformance

Minority- and women-owned managers have beaten the city’s pension funds’ benchmarks in all asset classes since 2015.




New York City’s pension funds announced they are expanding their emerging manager program after an analysis showed that the women-and minority-owned asset managers with whom they invest have outperformed their benchmarks net of fees in all asset classes since 2015.

“Rigorous analysis conducted over the past year in partnership with our five boards clearly indicates that diverse-owned firms have led to important gains within our portfolio,” New York City Retirement System CIO Steven Meier wrote in the retirement system’s second annual report of investments in minority- and women-owned business enterprises and emerging manager firms.

According to the report, participation of MWBE managers in the retirement system’s U.S.-based, actively managed assets grew to $19.5 billion, or 12.86% of its total portfolio, as of the end of June, from $16.82 billion, or 11.65%, last year. New York City Comptroller Brad Lander said in the report that he expects that by 2029, 20% of the pension funds’ U.S.-based, actively managed assets will be invested with minority- and women-owned investment firms.

“The strong historical performance of emerging managers both diverse and nondiverse—has prompted a strategic decision to recommend the expansion of our Emerging Manager programs,” the report stated. “We believe this expansion aligns with the overarching goal of securing long-term financial stability for pension beneficiaries, ensuring prudent diversification, and harnessing the potential of dynamic and successful asset management strategies.

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As part of the expansion of the emerging manager program, the Comptroller’s Office announced it is looking into proposals that include:

  • Expanding the direct emerging manager program in private equity;
  • Creating a direct emerging manager program in real estate and alternative credit; and
  • Expanding the fixed-income emerging manager program to include a direct emerging program.

“We often cite portfolio diversification as an important strategy for achieving portfolio objectives, and diversity supports diversification,” Meier said. “As large institutional investors, we benefit from a diverse portfolio of asset managers and strategies, and we’re well-positioned to expand our diverse and emerging manager mandates across asset classes.”

Among the portfolios’ asset classes, hedge funds are by far the most represented by emerging managers, who represent 36.71% of the asset class’s total exposure. This was followed in a distant second by private equity at 8.36% and alternative credit at 7.09%. Emerging managers represented 5.58% of public equity’s total exposure, while they represented 2.63% of private real estate, 1.78% of private infrastructure and 1.03% of public fixed income.

“MWBE managers have historically generated alpha for the five New York City retirement systems since 2015,” the report stated. “In Public Markets, all MWBE managers have generated excess returns net of fees. In Private Markets, the MWBE firms in the Systems portfolio have outperformed their respective benchmarks with an average PME Spread of 4.9%.”

The report noted that PME—public market equivalent spread—is a measure of the opportunity cost of investing in public market equivalents, and a positive PME spread indicates outperformance.

Within the private equity asset class, emerging managers have a PME spread of 8.5% since 2011, when the city’s retirement systems changed their strategy and approach to private equity investing. In real estate, emerging managers have a PME spread of 5.5% since 2015, when the real estate emerging manager program was relaunched. Alternative credit emerging managers have a PME spread of 24% since its inception in 2015, and infrastructure and hedge fund emerging managers have PME spreads of 6.48% and 3.96%, respectively.

“We hold our fiduciary duty to the pensioners first and foremost, and we will continue to identify emerging and diverse managers that we believe offer strong risk adjusted returns for our systems,” Lander said in the report.

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NYC Pensions Plan to Bankroll More Emerging Managers

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NYC Pension Funds File Board Diversity Proposals at 4 Firms

 

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