UNITED STATES - Diebold Corporation's $450m (€356.5m) defined benefit pension fund has made its first move into real estate investment and made a $10m commitment to JP Morgan's open-ended Strategic property fund.
Officials at Mercer Investment Consulting, its investment consultant, have revealed the fund is looking to achieve overall portfolio diversification through the allocation the opportunity for higher returns on a long-term basis.
The pension fund's current strategy is to invest in a variety of asset classes, including domestic and international equities, alternatives and fixed income, as well as real estate.
Its targeted allocation to real estate is 5%, split as 3% to core real estate and 2% for a global fund of funds strategy - an important issue as a contract with a global fund of funds manager is expected to be signed in the coming weeks.
While the commitment to JP Morgan's fund has been approved, the actual funding is unlikely to be handed over until the first or second quarter of 2009 because global financial markets are still in a state of turmoil and values on commercial real estate portfolios are still dropping alongside limited transaction activity.
Mercer - who has been the fund's investment consultant for two years, had recommended three commingled funds to Diebold for its initial real estate investment, the other two funds being PRISA managed by Pramerica Real Estate Investors and Trumbull Property Fund run by UBS Realty Investors.
JPM's fund will, for the most part, make investments in US core office, industrial, retail properties and apartments seen established and almost fully-leased.
The commitment from Diebold is said to be a welcome site for JP Morgan as the commingled fund had redemption queues totalling $650m in the third quarter this year for investors wanting to get out of the fund.
Diebold, which is an Ohio-based self-service delivery and security systems company with a market cap of $2bn, has followed a fairly typical strategy for its first real estate commitment as most pension funds look to establish a core portfolio when starting a real estate investment plan.