NORTH AMERICA – The California State Teachers Retirement System (CalSTRS) is to increase its exposure to real estate after moving its targeted allocation on a long-term basis from 12% to 13%.
The pension fund made this move after completing a yearlong asset and liability study.
Sharon Hendricks, investment committee vice-chair, said: "These studies we conduct every three years. The most recent one was a critically important one, examining the effectiveness of our response to the global financial crisis of 2008-09.
"This study was invaluable in familiarising our board members with the elements and dynamics of our portfolio.
"Our examination of the market allows us to adapt and to coax consistent long-term growth from a chaotic environment."
For the most part, CalSTRS will focus its new real estate investments on core.
According to a board-meeting document written by its real estate consultant, the Townsend Group, the core portfolio is projected to grow from 38% of the portfolio from the first quarter of this year to 50% by the fourth quarter of 2014.
This is earlier than the original 2017 projection for its rebalancing efforts.
The decision to increase the core part of the portfolio is a direct response to last financial crisis.
Ricardo Duran, part of the media relations team at CalSTRS, said: "The move was part of a strategic response to the global financial crisis. The investment staff and our consultant determined that the portfolio was over leveraged and invested too aggressively when the real estate market collapsed."
The other two sectors of the portfolio will be lowered during the same time periods.
The value-added part of the portfolio will be reduced from 15% to 13%, while opportunistic will be cut from 45% to 36%.
This does not mean, however, that the pension fund will ignore non-core opportunities, it said.
Townsend wrote in a board-meeting document that the pension fund would take advantage of attractive non-core opportunities as they arose.
Duran said CalSTRS expected to invest roughly $1bn annually into new core assets.
Much of this is a result of transfers from the opportunistic or value-add portfolios to core once they become stabilised.
The pension fund is looking to invest both in the US and on an international basis.
"On a near-term basis, CalSTRS will focus on domestic markets, but over the long term, we will look internationally," Duran said.