UNITED STATES - The California Public Employees Retirement System has revealed it suffered a $4.2bn (€2.82bn) loss on its real estate portfolio during the second quarter of 2009.
The pension fund had started April 2009 with a real estate portfolio carrying a net-asset fair-market value of $17.6bn but pension fund officials last week revealed its real estate assets pegged at $13.4bn by the end of June.
Officials said they believe the vast majority of the real estate commitments figuring in this decline were made during the 2005 and 2006 property market peak. The real estate portfolio was structured more aggressively than the benchmark and focused largely on housing, land purchase, development and leverage.
Despite the setbacks, CalPERS is still expected to continue investing capital in real estate for the future as the board has affirmed a 10% target allocation for real estate.
That said, it has redesigned its real estate policy and process in a bid to gain improved future performance and officials are evaluating manager relationships - a move which could see the pension fund end some of its existing partnerships.
One of the biggest losses suffered in Q2 2009 was in a core strategy separate account relationships with CalEast Global Logistics, managed by LaSalle Investment Management. The portfolio had been valued at $3.8bn in Q1 but dropped to $1.52bn by the end of June 2009.
Another portfolio - the California Urban Investment Partners - managed by MacFarlane Partners also lost more than half of its value in the quarter and dropped from $854m to $395m.
The assets, which are invested in commercial, residential and mixed-use project in real estate transit corridors, are now being managed by Stockbridge Capital Partners.
CalPERS' regional Institutional Mall Investors portfolio, run by Miller Capital Advisory, also fell in value from $1.75bn to $1.3bn.
The BlackRock Western Multifamily LLC high-quality residential property account lost $350m to $1.1bn by the end of Q2.
And National Office Partners, managed by Hines, saw the value of its US office buildings assets drop from $869m to $459m during the second quarter.