The Oregon Public Employees Retirement Fund (Oregon PERF) is planning on taking $1bn (€894m) of capital out of its public REITs in its real estate portfolio and re-investing the capital into core open-ended funds.
Tony Breault, senior real estate investment officer for the Oregon State Treasury, which oversees the investments at Oregon PERF, said: “The overall programme goal of the pension fund’s real estate portfolio is to be a diversifier through less correlation to the broader equity beta at the total plan level and provide partial inflation-hedging characteristics.”
With REITs being a larger component of the public markets, REITs were within the fund’s public equity exposures, in addition to its dedicated real estate portfolio, Breault said.
“Given this overlap and REIT exposures within the public equity portfolios, private market open-ended funds provide lower volatility, with quarterly asset pricing with the same or lower risk characteristics like high asset quality and lower leverage with the ODCE index,” he said.
Oregon PERF is planning on one core fund at its 7 December board meeting and then at least a couple of more funds next year.
It is likely to take a year to commit all of the capital into the core open-ended funds.
Oregon PERF will be working with its real estate investment consultant, Pension Consulting Alliance, on the core open-ended commingled funds it hires in future.
The pension fund does have some existing exposure to core open-ended funds with RREEF America II, in which it been invested since 2005.
The value of this investment was $80.7m as of March.
Oregon PERF will keep exposure to REITs up to as much as 10% of its real estate portfolio.
The pension fund has a REIT portfolio valued at $2.03bn as of March.
LaSalle, Cohen & Steers, Cliffwood, Woodbourne, European Investors and Morgan Stanley manage REIT investment for Oregon PERF, which has exposure to domestic and global REIT strategies.
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