The Kansas Public Employees Retirement System (PERS) is planning to ramp up its real estate commitments in 2015. The fund will invest up to $350 million in at least a half-dozen real estate funds. More from IPE Real Estate:
The pension fund will split the capital, with $200m for core strategies and as much as $150m for non-core investments.
An increased allocation and separate-account asset sales have given the pension fund substantial core capital to deploy.
Kansas PERS will invest the core capital with its existing core managers: JP Morgan Strategic Property Fund, Morgan Stanley Prime Property Fund, LaSalle Property Fund, Heitman America Real Estate Trust, UBS Trumbull Property Fund and Jamestown Premiere Property Fund.
It could also place capital in a new, core, open-ended fund as it evaluates the merits of adding a seventh core fund.
Non-core capital would be invested in funds targeting assets in the US, as well as Europe or Asia.
Kansas PERS, which typically makes $40m commitments, would consider approving three or four commitments next year.
The pension fund said it believed non-core strategies offered the potential for attractive risk-adjusted returns.
On an unleveraged basis, value-add investments are being underwritten to premiums of 200 basis points or more above core returns, it said.
Kansas PERS said it would continue to target skilled managers focused to their core competencies, rather than those accepting additional risk and new strategies to reach for outsized returns.
The System’s real estate portfolio returned 15 percent last fiscal year.