Norges Bank Investment Management, the world's largest sovereign wealth fund, unveiled its three-year real estate strategy that will broaden the sectors, geographies and forms of investing the fund taps into.

Norway's $2T wealth fund will invest between 3% and 7% of the fund in real estate, combining its direct investments with an increased focus on buying into real estate platforms and funds. It will also diversify its investments beyond the "limited number" of sectors and locations its previous strategy centered on.

The fund plans to balance out its exposure across its total real estate portfolio to between 15% and 35% in each of office, retail, logistics and living, with between 10% and 25% in other emerging sectors. A more diversified sector allocation will help protect against structural shifts in various CRE sectors, the fund wrote.

"We will gradually shift to a more balanced total real estate portfolio over time," Norges wrote. "This should position us to benefit from sectoral rotation while reducing concentration risk in any single area."

The fund also plans to have a wide range of locations for its real estate investments, allocating between 30% and 70% of its portfolio to North America, 20% and 60% to Europe, 0% and 15% to Asia Pacific, and 0% and 10% to emerging markets. While Norges stated location remains crucial for successful investments, the definition of a good location varies by sector and can change over time.

Norges stated it would adopt an integrated strategy when deciding whether to invest in unlisted real estate, such as direct purchases or investing in a platform, or in listed companies. The difference in risk-adjusted returns when comparing the two types of investing fades over time, it stated.

Direct investments will remain the fund's primary approach, but platform investments will offer access to specialized strategies and operational capacity that would be impractical to develop internally, the fund stated.

Additionally, the fund will adjust its real estate funding framework to better reflect the risk of each individual investment. This is a pivot from its prior strategy, which largely used the same equity share across asset types regardless of risk.

Norges stated the changes should have little effect on the fund’s overall risk and return in normal markets, though a slightly lower average equity share may marginally increase market risk.

The sovereign wealth fund is shaking up its strategy after stating in a November letter to Norway's finance ministry that the fund's real estate investments have underperformed its equity and bond holdings.

"Norges Bank is not satisfied with the results in real estate management, and is now making changes to the strategy," it wrote in the letter.

The fund's real estate posted a 1.8% return in the first half of 2025 compared to 6.7% for equities and 3.3% for bonds, according to fund data. Its direct property investments over the same period were worth about $36B, and investments in listed real estate companies were roughly another $33B.