Â鶹ӳ»­

The real estate sector is still not the focal point of sovereign wealth funds' investment strategies despite announcements to increase their allocation for real estate, according to new research by German property company Degi.

Thanks to their growing investment power, SWFs are able and will buy widely diverse real estate portfolios as well as single (large-scale) properties. But they have so far exercised this clout only occasionally, Degi says, pointing to the EUR 300mln acquisition by Singapore's GIC of two office buildings in Munich in 2006 and Abu Dhabi Investment Council's purchase of a stake in residential company Colonia Real Estate.

According to Degi, SWFs currently invest between 4% and 11% of their investment portfolios in real estate. The company expects this allocation to hover around 15% in the future, with total investment volume in real estate estimated at $150bn by 2010.

With a real estate volume of $70bn, the Abu Dhabi Investment Council currently tops the league in absolute terms, while Canada's and Alaska's SWFs are also dominant players, allocating respectively 11% and 10% of their portfolios to real estate. Norway recently created a 5% allocation to real estate for its EUR 245bn SWF, which is currently growing by $1bn a week, Degi said.

Degi notes that as long-term investors, SWFs 'contribute to the improvement of liquidity and stability of the global fiscal and real estate markets - provided that a rule-based investment and transparent strategy of the funds are in place.' Most funds now show signs of being more transparent than they were previously, publishing quarterly reports or establishing an internet presence, Degi says.

Degi has identified 47 SWFs set up by 35 different countries. The United Arab Emirates leads the pack with five funds, followed by China and the US (four each) and Saudi Arabia and Singapore (two each). Brasil and four other countries (Bolivia, India, Japan and Thailand) all plan to launch a SWF. The 10 biggest SWFs administer on average an investment volume of $310bn, while a quarter have over $50bn. Investments are targeted mainly at North America (90% of all funds), Europe (74%) and Asia (52%).