California Public Employees Retirement System has outperformed its real estate and infrastructure investment benchmarks over the past 12 months.
Real assets generated a 7.4% return in the 12 months ending 30 June 2017, the third highest performing asset class after public equities (19.7%) and private equity (13.9%).
The $323bn (€279bn) pension fund produced an overall return of 11.2%.
The highest peforming sub-asset class within its real assets allocation was infrastructure, generating 9.9%, beating its benchmark by 345bps.
Real estate produced 7.6%, beating its benchmark by 24bps.
CalPERS underperformed its forestland benchmark by 268ps, producing a 1% return.
The real estate portfolio was valued at $30.5bn at the end of March, representing just over 9% of the pension fund’s total assets.
To reach its long-term target of 11%, the pension would need to invest approximately $4.8bn in real estate.
CalPERS is mostly planning to invest in core real estate in the future. Its strategy calls for it to invest up to 75% of its real estate portfolio in income-producing, core assets.
It looks to accomplish this mostly through separate accounts with existing real estate managers.