REAL ESTATE - The Alaska Retirement Management Board, formerly known as the Alaska State Pension Investment Board, has approved a change of its investment strategy to increase its value-added component.
The pension fund approved to move its mixture of core versus value-added. The previous percentages were 70% core and 30% value-added. The new mixture is 60% core and 40% value-added.
The pension fund made these changes at its board of trustees meeting in early October. It was assisted in these actions by its real estate consultant, The Townsend Group. The two people working on this account for the consultant are Principals Micolyn Yalonis and Matt Johnson.
Alaska Retirement made these changes for two reasons. It’s State Investment Officer Steve Sikes said, "It is our belief that an increase in value-added will lead to a potential of higher returns and more diversification within our real estate portfolio."
The pension fund will be looking to find more investment opportunities by placing capital into commingled funds. There will be done by looking at a variety of investment funds that have either a value-added or opportunistic real estate strategy. These could be with existing managers or new managers it has never done business with.
The typical return for these kind of commingled funds are a leveraged IRR of no less than mid teens. This yield normally factors in a three- to seven-year holding period.
Alaska Retirement made these changes of part of its annual plan for investing in real estate for fiscal year for 2007. The pension fund will not be placing any capital into core investments as part of its strategy for the next 12 months.
Alaska Retirement has a current targeted real estate allocation of 10%. It has now invested this 10%. The pension fund does have a band of 4%. Sikes said, "This means we have the capability of investing a total of 14% of our total assets in real estate if we believe there are strong investment opportunities out there."
The pension does have an active REIT program. The current net asset value of its REIT portfolio is $110m.