Teachers’ Retirement System of the State of Illinois is to put half a billion dollars into new real estate investments in its current fiscal year, the bulk of which could go to opportunistic deals.
In a board meeting document the pension fund said it had approved a $500m (€417m) allocation for new real estate commitments in its tactical investment plan for the asset class for the 2018 fiscal year — which finishes at the end of June 2018.
The new investments will be split into three categories, the largest of which will be opportunistic at $100m to $300m.
The pension fund will be able to invest in up to $100m in the two other categories: value-add and co-investments.
Exposure to niche property types is set to grow, and the pension fund intends to issue a request for proposal for expiring co-investment agreements.
Illinois Teachers prefers to invest through separate accounts, which it said are a cost-effective and provide more control and transparency, and had generated strong risk-adjusted performance.
The pension fund exepects returns for the asset class to moderate over the next 12 months, with asset appreciation slowing as the market moves to the end of the cycle.
It expects performance to be similar to the total net return of 9.5% achieved for the 12 months ending March 2017.
Illinois Teachers’ real estate portfolio is worth $7bn, or 14.8% of total assets, below 16% allocation target for the asset class.
The portfolio consists of 64.9% core real estate, 20.8% opportunistic and 14.3% value-add assets.