US - Arizona State Retirement System has adjusted its portfolio and the amount its real estate program invests in core, non-core and public REITs because of increasing prices of core properties.
The maximum amount of the pension fund’s real estate portfolio invested in core assets has reduced from 40% to 20%.
Gary Dokes, chief investment officer for the pension fund, said: "Core assets are very pricey in today’s marketplace and we wanted to lessen our exposure it that area. This reduction reflects what is going on in our industry."
The pension fund has also increased the maximum amount invested in non-core assets from 60% to 80% while Arizona State has also changed the maximum amount that could be invested in public REITS from 20% to 30%.
The Arizona State $27bn (€19.8bn) fund took these actions on its real estate portfolio at its board meeting on April 20 with the assistance of Micolyn Yalonis, Principle at the pension fund’s real estate consultant The Townsend Group.
The pension fund currently has a 6% targeted allocation for real estate, or a maximum of
$1.7bn. However, the scheme still has a long way to go before it reaches its allocation as the pension fund has actually invested just 1.5% its total assets in real estate.
Arizona State has also made some recent commitments to the Heitman Value Partners II and AEW Value Investors 2 commingled funds.
Heitman is the commingled fund manager for Value Partners II, a commingled fund worth $800m. One of the bigger investors in the fund with a $200m commitment is the California State Teachers Retirement System.
The investment strategy for the Value Partners II fund is to set joint ventures with operators focusing on a single property type, to help investors achieve a gross IRR in the range of 15% to 17% over a three- to seven-year holding period.
AEW Capital Management is the fund sponsor for AEW Value Investors 2, a commingled fund which mostly buy existing assets, such as office buildings, shopping centres, apartments and industrial assets for possible investment and looks to approve them by a releasing, redevelopment or repositioning strategy.