UNITED STATES - The California State Teachers Retirement System saw the value of its real estate portfolio fall by another $327m (€217m) during the third quarter of 2009, confirming the difficult market conditions that US pension funds are still suffering.
CalSTRS officials say the losses are a reflection of pressure across the real estate portfolio as all real estate sectors have struggled to make headway in light of the economic and property downturn.
The value of the pension fund's real estate portfolio had stood at $13bn at the beginning of the third quarter but had dropped to less than $12.7bn by the end of September 2009.
At the time the assets were valued, CalSTRS had its allocations broken into three sectors - core, tactical and public real estate - but the fund had chosen to remain divested from public RE.
CalSTRS saw the biggest value fall in its tactical portfolio, as assets fell $237m from $8bn to $7.765bn across a range of strategies including international, opportunistic, land, speciality and urban real estate. The value of the core portfolio also dropped from $5.03bn to $4.94bn within three months.
CalSTRS conducted no transaction during the third quarter, according to officials, largely because there is still too much volatility and uncertainty in the current market conditions.
That said, the pension fund is thought to be well-positioned to take advantage of investment opportunities in 2010 as the $12.7bn in real estate means amounts to 9.8% of its total plan assets and the targeted allocation to real estate is 12%.
Assets holdings in real estate fell from 11% to 9.8% in part because the pension fund's assets rose in value elsewhere, from $118.8bn to $130.2bn by the end of September.
Moreover, CalSTRS may yet raise its real estate target allocation to 13% by the beginning 2010 providing strong opportunities can be found, although officials say any allocation could be six months behind.