NORTH AMERICA – The California State Teachers Retirement System (CalSTRS) is looking into the possibility of expanding its international real estate portfolio and investing capital in Europe.
According to its business plan for the 2013-14 fiscal year, developed with real estate consultant the Townsend Group, CalSTRS is looking "across the spectrum" – from opportunistic to core assets – in world-class cities worldwide, particularly in Asia, Europe and Latin America.
In a board meeting document, the pension fund said its international real estate portfolio had shrunk significantly in recent few years as it focused on core investments in the US and liquidated higher-risk global investments.
CalSTRS currently has an international real estate portfolio valued at $3.3bn (€2.6bn) as of the end of March, making up 15% of its total real estate portfolio.
The pension fund is in the process of shifting its real estate portfolio away from commingled funds towards joint ventures and separate accounts.
In an email, CalSTRS wrote that this change in strategy gave it the flexibility that comes with having greater control over decision-making and capital flows.
The fund said it was unsure how much capital it would earmark for real estate during the fiscal year, as investment staff continue to direct sales out of its existing real estate portfolio and encourage fund managers to liquidate fund investments.
CalSTRS has a real estate portfolio valued at $22.3bn, or 13.6% of its $163.7bn overall investment portfolio.
The fund plans to reduce its real estate allocation to 12% of total plan assets.
The investment focus going forward will be to "zero in" on core assets and decrease opportunistic, higher-risk investments.
The pension fund's existing real estate portfolio is made up of 37% core, 17% value-add and 46% opportunistic.
By 2015, CalSTRS is aiming for 50% core, 20% value-add and the balance opportunistic.