The California State Teachers Retirement System (CalSTRS) is looking to step up its investment in real estate outside the US.
The pension fund is seeking international partners to invest in low to moderate-risk strategies targeting cash flow, according to a board meeting document.
In an email, CalSTRS said it would consider strategies in Western Europe, Japan, South Korea, Hong Kong and Australia.
The fund is looking at core and value-add strategies and could invest through funds, separate accounts and joint venture structures.
CalSTRS’s real estate portfolio accounts for 12.2% of its $193.1bn in assets, slightly below its 13% target allocation for the asset class for the new fiscal year.
The fund can invest $1.7bn (€1.55bn) in real estate during the new fiscal year.
In the US, CalSTRS is continuing to follow a build-to-core strategy across the four main property sectors.
To date, the fund has been most active in the apartment and industrial sectors.
CalSTRS sees the potential for more attractive returns in build-to-core than in existing core assets.
The pension fund said it would expect a 150-300 basis point premium, on an unleveraged basis, over a 3-5 year hold.
The fund is looking to sell some of its holdings in legacy opportunity funds.
According to a board meeting document, the pension fund has around $5bn, or 17% of its real estate portfolio, in pre-fiscal crisis closed-end funds.
CalSTRS staff will push for liquidation of the holdings over the next three years.
With the pension fund’s existing core portfolio overweight US apartments, CalSTRS will look to sell apartment assets.
No specific markets will be targeted, but certain assets will be selected for sale.