San Francisco Pension Weighs Larger Emphasis on Local Real Estate

Golden Gate Bridge

The San Francisco Employees Retirement System is deciding whether to increase its allocation to real estate in the San Francisco Bay Area.

Specifically, the board is weighing whether to begin allocating up to 3 percent of its assets toward such investments.

However, the area’s high real estate prices warrant caution, according to the fund’s advisors.

From Investments & Pensions Europe:

A 3% target allocation to real estate in the nine-county San Francisco Bay Area – first mooted by the retirement board in 2013 – is still being mulled by the pension fund.

No plans were approved at a meeting this month. Its advisers, Angeles Investment Advisors and Cambridge Associates, warned against over-concentration in its real estate porfolio at a time when the pension fund is looking more broadly at real assets.

A recent board meeting document stated: “SFERS private markets team and Cambridge Associates recommend maintaining a broad allocation to real assets rather than carving the category into several pieces such as infrastructure, natural resources, or San Francisco-based real estate.”


Investment staff will approach managers active in local real estate and evaluate the merits of entering into local co-investments with them.

The staff will also explore whether there are further efforts it can undertake to source and evaluate San Francisco-based real estate investment opportunities with attractive valuations and good prospective returns.

The San Francisco Employees Retirement System manages $20 billion in assets.


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CalPERS Taps SIO for Real Assets From Morgan Stanley


CalPERS has hired Paul Mouchakkaa to be its senior investment officer for real assets.

Mouchakkaa has previously been a managing director at Morgan Stanley and Pension Consulting Alliance. He’s also worked at CalPERS as a real estate portfolio manager.

More from Globe St.:

As SIO of real assets, the Los Angeles-based Mouchakkaa will manage a 60-member professional staff, with responsibility for implementing and managing investment strategy and policy for the pension fund’s $29.6-billion portfolio in real assets worldwide. He will also contribute as a member of the investment office’s senior management team in developing CalPERS overall investment strategy.


“Paul is a talented and experienced real estate professional, and we’re thrilled to have him on our team,” Eliopoulos says. “He has a proven track record of success and I’m confident that will continue at CalPERS.”

CalPERS’ real assets arm is made up of the real estate, infrastructure and forestland programs. Largest of these is real estate, which holds more than $25 billion in retail, office, industrial and other property assets. This past October, CalPERS said it planned to increase its commercial real estate allocation by 27% over the next year, upsizing its exposure by as much as $7 billion.

Mouchakkaa will start at CalPERS on March 2.


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More European Pensions To Move Into Real Assets, Says Study


The coming years will find European institutional investors increasingly turning to real assets, according to new research from alternative asset manager Aquila Capital.

The new paper, titled Real Assets – The New Mainstream, predicts that investors will turn to real assets and equities and bonds will become less attractive.

Details from a press release:

The research predicts that the Dow Jones Index will deliver average total returns of 4% per annum over the next 10 years, while real returns on German 10-year government bonds are set to be negative, even if interest rates were to reach 4% by 2024.

Alongside these estimates, 60% of institutional investors in Europe expect institutional allocations to real assets to increase over the next three years.

Oldrik Verloop, co-head of hydropower at Aquila Capital, says: “This unique investment landscape, for which there is no precedent in history, is giving rise to considerable challenges for pension fund managers struggling to fund deficits.

“Among these challenges is the need to assess the impact of today’s loose monetary policies on global interest rates and inflation tomorrow.”

He says that institutional investors seeking to future-proof their portfolios will be searching for new investment solutions, leading them to shift allocations towards real assets.

“Real assets are uniquely positioned to provide value and enhance overall risk-adjusted returns in a broad range of market environments. The powerful combination of market-independent stability and growth make them an attractive core holding for institutional investors,” he adds.

As part of the research, 50 institutional investors across Europe were surveyed.


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CalPERS Put Its Money to Work in India in 2014


The Canada Pension Plan Investment Board, among other pension funds, has been vocal about making India part of their long-term investment strategy.

CalPERS hasn’t announced it from the top of the hills, but the numbers reveal that the country’s largest public pension fund is also taking considerable interest in India.

CalPERS increased its exposure to India by over 33 percent in 2014.

From VC Circle:

The California Public Employees’ Retirement System (CalPERS), one of the top public pension funds in the US, saw its exposure to assets linked to Indian currency rise by over a third to $1.7 billion in the fiscal ended on June 30, 2014 as compared to $1.27 billion in the year ago period, according to the annual financial report of the company.

Almost all of this was due to changes in fair value of assets in the equity securities bucket from $885 million to $1.3 billion. The value of the real assets, representing primarily real estate assets, shrunk marginally.

This data represent investment securities of all CalPERS managed funds, including derivative instruments that are subject to Indian rupee foreign currency risk.

It did not list any quantum against PE assets in India and it could not be ascertained if this is due to its forex hedging over dollar denominated offshore funds or it has actually disassociated itself with India-focused PE funds.

But CalPERS does counts itself as an investor in several global PE funds investing in India including some in their regional funds. These include Blackstone, KKR, Carlyle, TPG, Clearstone, SAIF Partners, etc.

CalPERS manages over $300 billion worth of pension assets.


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Virginia Pension To Put $100 Million in Blackstone Real Estate Fund

businessman holding small model house in his hands

The Virginia Retirement System (VRS) has committed $100 million to a Blackstone real estate fund that will invest in large office, retail, and apartment properties.

From IPE Real Estate:

The Virginia Retirement System (VRS) has allocated $100m (€80.1m) to the core-plus Blackstone Property Partners fund.

The open-ended fund, which invests in a combination of core, value-added and opportunistic strategies, is targeting returns of between 9% and 11%.


The pension fund is the third to commit to the Blackstone vehicle, following $100m in overall commitments from the Arizona State Retirement System and the Texas Permanent School Fund – the latter being one of the first to invest in the fund.

Blackstone is co-investing $75m in the fund, which will be 50% leveraged.

The manager will buy larger properties and portfolios across the office, industrial, retail and apartment sectors.

Blackstone, traditionally an opportunistic fund manager, can buy either directly or invest in real estate operating companies.

VRS, which has no targeted allocation to real estate, had a total $6.84bn in its real assets category as of September.

VRS manages $66.1 billion in assets.