UNITED STATES- Contra Costa County Employees' Retirement Association has approved a $75m (€48.6m) commitment into the ING Clarion Debt Opportunity Fund II - its first investment in a debt fund focused on real estate.
Officials at Contra Costa County thinks now is a good time to put some capital into the sector with the status of the credit crunch as it is, as many financing sources can pick the best deals given the lack of capital in the marketplace.
The pension made its investment decision after hearing a presentation from ING Clarion Capital, led by Dan Heflin, chief executive officer of Clarion Capital.
Heflin discussed the triggers the current credit crunch, noting some of the factors included home price depreciation, sub-prime delinquency rates and the spreads of BBB-rated commercial mortgage paper.
Contra Costa County made its final selection with the assistance of its consultant, Milliman.
Clarion Capital is hoping to raise a total of $1bn for Debt Opportunity Fund II through institutional investors while the fund manager will ING Clarion employees will make a co-investment of $2.5m.
Projected return for investors in the fund is a net IRR of 16.8%, though there is a wide swing in potential returns as the upside could be as much as 21.8% while the downside could be a return of 2.1%.
That said, the pension fund believes ING Clarion Capital is a proven player in the debt market as the company has more than $5bn in assets under management and has both commingled funds and separate accounts in this arena.
In May, the firm received a new $100m allocation from New York State Teacher Retirement System for a separate account relationship.
Contra Costa County made the commitment with ING Clarion Capital from its fixed income portfolio.