NORTH AMERICA – The Illinois State Board of Investment is planning to make its first commitments to real estate funds targeting solely Europe or Asia.
The pension fund expects to allocate up to $90m (€66.5m) to this strategy.
Bill Atwood, executive director at Illinois State, said: “Europe and Asia currently have some strong investment opportunities, which will allow us to achieve some additional levels of diversification for our overall investment portfolio.”
Illinois is looking to commit to 2-3 commingled funds with investments in the range of $30m each.
These funds would have a value-added approach, investing in a diversified group of property types.
Illinois will be conducting searches to locate managers along with its real estate consultant, Courtland Partners.
The pension fund recently made two investments with real estate managers and strategies in the US – $40m in the Prime Property Fund and $30m into the Latitude Management Real Estate Capital III.
“Courtland made the recommendation, and we agreed we needed some manager diversification within our core real estate portfolio, so we added The Prime Property Fund,” Atwood said.
“One of the factors in choosing them was that they had a small entry queue. This allows half of our commitment to go into the commingled fund right away and the other half very shortly.”
Prime Property had an entry queue of $125.5m, as of October 2013.
The fund’s annualised gross return for the third quarter of 2013 was 4.3%, while its gross asset value was $12.8bn.
The fund, managed by Morgan Stanley Real Estate, is structured as a core, open-ended fund.
Latitude Real Estate Capital III is a debt investment fund.
The commitment by Illinois State is the pension fund’s first foray into this market.
The strategy for the fund is to provide loans on new properties or existing properties seeking refinancing.
It only invests in the US, and its targeted returns are in the range of 10-12%.