UNITED STATES- Kansas Public Employees Retirement System has allocated $150m (€106m) to US preferred REIT securities through an existing REIT manager, Brookfield Redding.
Pension fund officials said strong projected returns make the strategy attractive at present, as it's anticipated to produce an average yield of 8.5%.
Kansasa PERS is comfortable working with Brookfield Redding as it already handles a domestic REIT portfolio valued at $38.4m at the end of November 2009.
Many US pension funds have found US public REITs are able to access more capital at a higher rate than private real estate companies. REITs raised $37.5bn through a combination of debt and equity in 2009, giving public REITs the advantage against private real estate operations.
It is also predicted this trend will continue in 2010 where more capital is being raised.
The new allocation being made by Kansas PERS will nearly double the size of its existing REIT portfolio, as the pension fund had valued the public REIT sector of its real estate portfolio at $201.5m at the end of November 2009.
Kansas PERS works two other domestic REIT managers: Duff & Phelps running a $34m portfolio, and Principal Real Estate Investors with $63m in assets under management.
The pension fund also has some REIT exposure on an international basis as AEW Capital Management oversees a portfolio valued at $32m and Morgan Stanley Real Estate handles $34m in international assets.
Kansas PERS funded the preferred REIT securities from its domestic equities asset class as the pension fund does not have a specific allocation to REITs.
The value of the domestic equities portfolio is $3.2bn and the total plan assets stand at $11.6bn.