REAL ESTATE - The California State Teachers Retirement System has made a $100mn commitment to the Scout Fund that is being managed by Hawkeye Partners.
This commingled fund will look to sign up between six to eight emerging managers for the fund. The fund has two different kinds of real estate managers in mind.
One would be real estate developers, who are trying to attract institutional capital for the first time. The other would be a situation where a person who used to work at a large real estate manager and is going out on its own and is creating a new company.
The commitment to the Scout Fund is a new relationship for CalSTRS. It had not previously invested with Hawkeye Partners. The pension fund considers this to be a specialty investment. It had hired Bard Consulting as its real estate independent fiduciary to look at the investment opportunity.
Hawkeye Partners is looking to raise a total of $600m. One of the investors that has already committed to the fund for $75m is the Pennsylvania State Employees Retirement System.
One of the more interesting features of the fund is its profit participation. The Scout Fund will participate in up to 35% of the profits of any emerging manager that becomes part of the fund.
The projected IRR in the fund is in the range of 12% to 15%. This yield is based on a long-term holding period.
The emerging managers in the Scout Fund will have a variety of investment strategies. They could have a national or regional geographical scope. This could depend upon the manager’s expertise.
There also will be some diversity by property type. Some of the managers will be investing in the traditional property types of office, industrial, retail and apartments. Some specialized properties will be considered as well.
The investments for the emerging managers will have different levels of risk. Some will be developing new properties and others will be buying existing assets.