UNITED STATES - Indiana Public Employees Retirement Fund has approved commitments totaling $150m (€96.4m) into two non-core investment funds taking advantage of the credit crunch.
Indiana PERF believes there is a strong investment opportunity as a result of the dislocation in the CMBS and other debt related markets as many capital sources in this segment of real estate are no longer around.
This led the pension fund to decide, assisted by Mercer Investment Consulting its April 18 board meeting, to invest $75m each into the Colony Credit Opportunity Fund and Walton Street Real Estate Fund VI.
Colony Capital is looking to raise $1bn for the Credit Opportunity Fund and investors in the commingled fund are projected to achieve gross IRRs of 20%.
Colony Capital has a history of outperforming this return figure as its non-performing loan portfolio and distressed investment strategy has yielded a gross annualized return of 26% since 1991.
The fund's investment strategy is to place capital into a variety of debt-related investments, including investment grade and non-investment grade CMBS, RMBS, real estate-related B-notes and mezzanine loans.
Walton Street Real Estate Fund VI, meanwhile, is also an opportunity fund but it is seeking a total equity raising of $3bn.
Walton Street Capital also has a successful track record in the opportunistic sector as its previous five funds saw managers invest $13bn of capital and produced a realized gross equity multiple of 2.3x and an IRR of 28%.
Investors in Real Estate Fund VI are projected to achieve a net return of 18% and an equity multiple of 2x.
Walton Street Capital will be making a $50m co-investment into the commingled fund which will be used to make debt and equity investments in real estate properties and in real estate operating companies.
Its main investment focus will be with assets in the United States although some capital will be placed in Mexico and India.