UNITED STATES - Arizona State Retirement System has decided to open its real estate investment program to the international stage on both the private and public side.
Arizona made its first commingled fund commitment of $50m (€33.7m) towards this strategy into the AIG Asia Real Estate Partners II and shifted some of its domestic REIT capital into global REITs, with the assistance of its real estate consultant The Townsend Group.
Micolyn Yalonis, principal at Townsend, said the main factors for these moves in the pension fund's strategy are they will produce an additional layer of diversification and the potential for higher returns.
Indeed, investors in Asia Real Estate Partners II are projected to achieve a net IRR of at least 20% through the opportunity fund, as the $500m raised by will invest office, industrial, retail and apartments in Japan, China, Hong Kong, South Korea and Singapore.
It is likely the pension fund will invest in additional commingled funds in the future which buy real estate in Europe and Asia, particularly as Arizona State recently decided to move $140m from its domestic REIT program towards a global REIT strategy.
The pension fund has already allocated $70m each to two global REIT managers - European Investors and LaSalle Investment Management.
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