California Public Employees Retirement System (CalPERS) is committing a further $1.5bn (€1.4bn) to Fifth Street Properties, its core US office separate account.
The billion-dollar allocation has been revealed two months after the US pension fund announced it would sell $3bn of non-core real estate holdings.
The country’s biggest state pension fund is reducing the number of investment managers it works with and is concentrating on fewer, larger allocations.
It also wants up to 75% of its real estate portfolio to be invested in strong income producing properties in the office, industrial, retail and apartment sectors.
CommonWealth Partners, which has invested on behalf of CalPERS since 1998, will target mostly core office buildings on the East and West Coast markets, including Washington DC, Boston, Los Angeles, San Diego, San Francisco and Seattle.
CalPERS has also allowed CommonWealth to invest 15% of capital in value-added assets. The manager has full investment discretion.
CommonWealth will be buying properties that are located in either central business districts or suburban areas.
In many cases the transactions will be all-cash purchases. Leverage on the portfolio is approximately 45%.
Fifth Street Properties was given a similar boost in 2012, when CalPERS allocated an extra $1.75bn for the strategy.