What the World's Largest Sovereign Wealth Fund Will Buy Soon
Checking with Investopedia I reacquainted myself with the correct answer. A sovereign wealth fund is "a pool of money derived from a country's reserves, which are set aside for investment purposes that will benefit the country's economy and citizens.
"The funding for a sovereign wealth fund (SWF) comes from central bank reserves that accumulate as a result of budget and trade surpluses, and even from revenue generated from the exports of natural resources."
The nation with the world's largest SWF ($682 billion), built from its vast oil and natural gas resources, is Norway. The Norwegian Government Pension Fund Global , which is managed by Norges Bank Investment Management is ready to go on a specifically targeted shopping spree with Norway's SWF money.
What is it targeting for investment purposes? American real estate in areas of the country the SWF believes are the best markets. According to a recent article in Monday's Wall Street Journal , Norway's SWF "...has been in talks about deals with potential real-estate partners in New York, Washington and Boston in recent months."
The NBIM's real-estate chief investment officer said recently the fund may begin working on its first U.S. deal as early as the first quarter of 2013. He also mentioned the focus would probably be on either high-end retail or U.S. office space. Prices in this kind of real estate have already soared.
According to the Journal, "Market participants, however, say Norway's appetite for high-priced properties and its long-term horizon for returns could help it find success in the world's biggest property market, " the U.S. Even though prices are high now, past strategies like this have paid off in the past.
FUR frequently invests in large real estate transactions but hasn't worked with NBIM yet. Winthrop is currently paying a dividend with a yield to price of around 6%. Its share price has ranged from $10.32 to as high as $11.40 since Oct. 15. Below is a one-year price chart with its improving free cash flow.
FUR data by YCharts
FUR's generous dividend represents a payout ratio of 250% of the company's earnings (or "funds-from-operation" as they call it in the world of REITs), which is quite lofty. Winthrop trades at a forward (one-year) PE ratio of only 9.