There may be worrying developments in some property markets, but the world’s biggest sovereign wealth fund says it has no intention of pulling back from real estate.

A gap is opening between what stock-pickers think real estate is worth and what assets could be worth in the physical market, a potential sign that a correction could be looming. For example, the largest real estate investment trust in the U.K., Land Securities, now trades at a 36 percent discount to net asset value.

Read more U.K. discrepancy between public and private pricing

“It’s clearly a red flag in pricing if anything is too far off in any direction,” Karsten Kallevig chief executive officer of Norges Bank Real Estate Management, said in an interview at his Oslo office on Wednesday.

Kallevig, 43, now oversees $24 billion in key real estate, including much of London’s Regent Street, as well as properties on Times Square and the Champs Elysees, among other prime spots. Overall, the fund holds about $1 trillion in stocks, bonds and real estate, and is in the process of building its property holdings to about 7 percent of its total portfolio.

While Kallevig acknowledges that in times of dislocation it’s good to be cautious, the alarm bells are nowhere near as loud as they were in early 2016, when the fund took a six-month hiatus from property buying to figure out what was going on.

So far, the fund still has an appetite for new acquisitions. “I haven’t pulled back mandates, that’s for sure,” Kallevig said.

The fund’s real estate holdings have returned 5.4 percent so far this year.

After splitting off from the rest of the fund’s benchmark portfolio and increasing its scope to buy real estate last year, Kallevig is expanding his internal top management team. In September, he appointed two new chief investment officers to oversee the U.S. and European markets.

The fund’s strategy is to focus on about 10 global cities. The new CIOs see similarities in Europe and the U.S., and are competing with largely the same bidders on both sides of the Atlantic for the most prestigious properties. “It’s the same type of names we’re seeing across all our markets, the deals that we target are relatively large,” Per Loken, who’s in charge of the U.S. markets, said in an interview.

The fund has has ample leeway to boost spending, but remains “cautious” given the amount of cash pouring into commercial real estate in search of a pick-up in yield. “We have seen that real estate yields have come down over the past years, but the spread between bond yields and real estate yields still looks attractive,” Loken, 35, said.

Investing in global cities, with prime offices being the backbone of the portfolio, the fund also holds retail and logistics properties. With Amazon as one of its biggest tenants, the real estate unit is a close observer of the shift to online shopping.

“Retail is going through an evolution for sure, and it is something we are very focused on,” said Romain Veber, the London-based head of European markets. The fund is placing its bets on “high street retail,” which will “survive in the long term,” he said.

The fund owns large parts of Regent Street and the Mayfair district in London, and even snapped up a retail and office property on Oxford Street only weeks after the Brexit vote. It also owns a big shopping mall in Sheffield, which has proven to be “resilient,” the 39-year-old said.

“In many ways our retail exposure and logistics exposure are two asset classes that go very well, go hand in hand, with each other,” Loken said.

With a perspective much longer than most investors, and with no need to take up debt to finance purchases, the fund can invest through business cycles and also takes a calm view on political turmoil. The Brexit vote and the election of U.S. President Donald J. Trump haven’t fazed the fund to any great extent.

“We remain focused, we remain cautious, and we try to take advantage of this,” Veber said.

[“Source-bloomberg”]