UNITED STATES - California Public Employees Retirement System has made a $200m (€135.4bn) commitment into a US Debt Fund investment run by JER Investors Trust, to take advantage of dislocation in the credit markets.
CalPERS is understood to have formed the investment fund with JER Investors Trust, a publicly-traded mortgage REIT, and will see JERinvest $22m of its own capital into the fund.
Given the lack of capital being invested through the debt markets, there is an opportunity to invest in some high quality real estate, according to Mark Weiss, pesident of JER Investors Trust.
"It's our opinion that there is a real opportunity to take advantage of the current situation in the marketplace," said Weiss.
The pension fund is playing a little safe with this venture as the investment fund will not be investing in distressed debt.
That said, Weiss did give one example of the kind of deal the fund might be investing in.
"There might be a situation where a new office building that is in pre-leasing stage has an existing construction loan on it," said Weiss.
If it needs some additional capital to cover some costs until the leasing situation improves, we would provide the capital for this transaction," he added.
JER Investors Trust believes the fund will generate 'mid teens' net IRR returns, though the exact return will depend on a holding periods which could last anything from 3-10 years.
Investments will only be placed in US assets, but could be distributed across commercial-backed mortgage securities (CMBS) investments, mezzanine debt and whole loans.
Assets, for the most part, will be invested in office, industrial, retail properties and apartments while leverage will vary.
JER Investors Trust has total assets in its REIT of around $1bn but the deal with CalPERS is the first time the REIT has created an investment fund with a single investor.