non-core investments

San Diego County Pension May Ramp Up Real Estate Investment As it Looks to Reach Target Allocation

To reach its target real estate allocation, the San Diego County Employees Retirement Association (SDCERA) could invest $500 million in real estate over the next two years, according to an Investments & Pensions Europe report.

The fund’s target real estate allocation is 10 percent.

More details from IPE Real Estate:

According to board meeting documents, San Diego is considering placing this capital with existing and new real estate managers.

The pension fund, advised by consultant The Townsend Group, is considering hiring a manager for a new separate account.

It is also considering investing in commingled funds to gain access to niche investment strategies, as well as real estate investment trusts (REITs).

The fund has previously placed capital with CBRE Global Investors, Blackstone, Cornerstone Real Estate Advisers, JP Morgan Asset Management, Pramerica Real Estate Investors and Deutsche Asset & Wealth Management.

San Diego will look to rebalance its portfolio, moving from an even split between core and non-core investments to a 70-30 weighting, a move that will be aided by some of its existing opportunity fund investments coming to an end.

The expected return for the new portfolio weighting is around 7.5%, with a standard deviation of 10.8%, according to Townsend.

SDCERA manages approximately $10 billion in pension assets.

Photo by c_ambler via Flickr CC License

Kansas Pension Plans To Commit $350 Million To At Least Six Real Estate Funds

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.

Oklahoma Teacher’s Fund Hires Six Real Estate Managers

The Oklahoma Teacher’s Retirement System has chosen six real estate managers to handle a combined $300 million worth of non-core investments.

Reported by I&P Real Estate:

The US pension fund will invest in the American Realty Strategic Value Realty Fund, Antheus Realty Partners IV, Dune Real Estate Fund III, GreenOak Real Estate Partners US Fund II, Landmark Real Estate Fund VII and Starwood Opportunity Fund X Global.

The funds were selected on the recommendation of the fund’s consultant, Gregory W Group.

Oklahoma initially planned to invest $50m with each of the six managers.

Landmark, however, could not take the full amount by the time of the board’s approval and was allocated $35m.

The pension fund planned to spread the remaining $15m across the remaining five managers.

However, GreenOak closed its capital raise.

The other four managers will receive $53.7m each.

Antheus Realty Partners IV will focus solely on apartments, while Starwood will invest equally in Europe and the US.

Landmark will buy current limited partnership positions in existing funds on the secondary market.

American Realty will be buying value-add US office, industrial, retail and apartment properties and has raised $240m of capital for the open-ended fund.

GreenOak raised $756m for its US-focused fund, which will invest in several property classes.

Dune Capital is targeting an $850m total equity raise for its opportunity fund.

Investing in multiple property types, the fund has targeted IRRs of 15-17% net.

The pension fund is targeting net returns of 11-12 percent.