US - The Illinois State Board of Investments (ISBI), which manages employee pensions for the state of Illinois, said the fund would increase investment in real estate by $100m to $200m (€80m-162m) over the next 12 months as it readjusts its portfolio.
William Atwood, executive director at Chicago-based ISBI, said while the fund was looking to invest in real estate, prices were "fully valued" and a "big impediment" for its strategy.
The fund invests in real estate through two separate accounts - CB Richard Ellis and Clarion Partners, formerly part of the Dutch insurance company ING.
Though the former is fully invested, Clarion has been allocated $500m, of which it has drawn roughly $300mn, Atwood said.
"My best estimate is that (Clarion) will draw between $100m and $200m over the next 12 months," he said.
He added that it would take some time for the "dry powder" to be deployed and bring the pension fund towards the 10% asset allocation target for real estate, against the current 8.5%.
"It would be contingent upon their deal flow, and it is further complicated by the possibility that they (general partners) could return capital," he said.
The ISBI has a total portfolio of $11bn, with 76% is invested in core real estate and 24% in non-core real estate.
It plans to bring the ratio to 80% core and 20% non-core or opportunistic assets by simultaneously restructuring the real estate portfolio and moving from non-core real estate towards core real estate, Atwood said.
He said the fund preferred private equity over opportunistic assets in the current environment because the former offered better return and lower standard deviation for the same amount of risk.
The ISBI is planning to deploy $100m per year into private equity - "generally speaking, five $20m allocations".
"We are anticipating return of capital from our existing PE funds, as well as overall portfolio growth," Atwood said.
He said the increase would not happen soon, as there was a lag - "in excess of three years sometimes" - between when the ISBI commits capital and when it is actually called by the general partner.
Currently, private equity is roughly about 6% of total assets, versus the 5% target.
Atwood said ISBI had very little investments in overseas real estate and no major plans to invest offshore.
Its real estate holdings - currently at $966m, or about 8.5% of total assets - are held in limited partnerships, trusts and other forms of pooled investments.
The pension fund has a total investment portfolio of around $11.18bn as of June.