Exeter Property Group has begun raising capital for a $1.6bn (€1.46bn) industrial real estate fund, which is expected to be oversubscribed.

New Mexico State Investment Council (SIC) confirmed to IPE Real Assets that it is one of the first investors to invest in Exeter Industrial Value Fund V.

It is making an early investment in a bid to ensure its $100m commitment is fullly accepted into the fund.

Exeter’s previous fund was oversubscribed, raising $1.15bn in 2017, and sources familiar with the matter expect a similar situation for the new fund. 

There is high demand from US pension funds for exposure to industrial real estate, as the sector is expected to outperform the broader market.

New Mexico SIC is seeking to be over-allocated to industrial assets. The commitment to the Exeter fund will take the industrial weighting of its real estate portfolio to 24.9%, above the 18.3% weighting of the NFI-ODCE index.

Exeter will target net returns of 13-14% and gross returns of 16-18%, by acquiring assets with short remaining lease terms, properties with vacancy and assets that can be developed or redeveloped.

New Mexico SIC has also approved a $100m commitment to the Carlyle Property Investors Fund, an open-ended core-plus real estate vehicle.

The Carlyle Group, traditionally know for opportunistic and higher-return strategies, first moved into core-plus real estate in 2015.

According to a board meeting document from New Mexico SIC, the Carlyle fund had 86 investments worth $2.2bn at June this year.

The fund targets multifamily, student and senior housing, manufactured housing, medical offices and self-storage.