UNITED STATES - The Arkansas Teacher Retirement System has approved a new target for estate investments that is almost twice as much as the previous allocation.
The new target is 10% but more could be allocated to the asset class in the future, according Paul Doane, chief executive of the at $11bn (€7.08bn) pension fund.
"There is a chance that the allocation could be moved to more than 10% down the road. It's our opinion that real estate is attractive as it has a very low correlation to equities and will give the pension fund the opportunity to achieve higher returns."
This gives the pension fund a total of approximately $1.5bn to invest in real estate, and the large majority of this capital will be invested in commingled funds, said Doane.
"Right now, we are fairly set with the core component of our real estate portfolio. We would be more interested in investing capital in commingled funds with a value-added or opportunistic strategy."
Arkansas Teacher officials figure a typical commitment to funds will be in the range of $30m-$50m, and an early example is its $50m commitment to Rothschild's Five Arrows Realty Securities Fund V, which makes entity-level investments in US public and private companies.
The pension fund is now looking at commingled funds which invest in the US, Europe and Mexico, and is doing so with the assistance of Scott Brown, principal at the pension fund's consultant, Ennis Knupp & Associates.
Arkansas Teacher is expecting to invest approximately $200m of the new allocation in a direct real estate program, either in the pension fund's home state or through co-investments with real estate managers across the United States.