The Alameda County Employees’ Retirement Association is boosting its exposure to real estate.
The pension fund, with assistance from its real estate consultant Callan Associates, increased its targeted allocation for the asset class from 6% to 8%.
IPE Real Estate first reported the move in May last year, which reverses a decision in 2008, when it was advised by The Townsend Group to lower its target allocation from 9% to 6%.
The fund now believes overall portfolio risk will decrease due to real estate’s low correlation with other portfolio asset classes.
The sector also generates a stable, predictable income stream that can meet cashflow needs.
The pension fund plans to invest as much as $250m (€229m) in real estate over the next three years, according to a board meeting document.
As much as $125m for core and core-plus commitments will be committed, with all the capital invested in either open-ended or closed-end funds.
The pension fund said it favoured this investment structure, as its portfolio was conservatively managed, while funds provide broader diversification geographically, as well as by asset class.
Both existing fund managers and new managers will be considered for the core and core-plus capital.
The pension fund’s current list of managers includes Clarion Lion Industrial Trust, Heitman American Realty Trust, Jamestown Premiere Property Fund, JP Morgan Strategic Property Fund, MetLife Core Property Fund, PRISA and UBS Trumbull Property Fund.
The rest of the new allocation for real estate will be filled out by funds with a value-add strategy.
The pension fund said $75m was earmarked for 2017 and $50m for 2018.
Alameda County had a real estate portfolio valued at $479.4m as of the end of September last year, or 7.4% of its $6.5bn in total plan assets.