Kentucky Teachers’ Retirement System is investing $120m (€110m) in non-core real estate.
The US pension fund approved $60m commitments to Rockwood Capital’s Real Estate Partners X fund and Blackstone’s Real Estate Partners VIII fund.
Gary Harbin, executive secretary at the pension fund, said the managers’ past performance was behind the decision to back the strategies.
The pension fund, he said, is aiming to make additional real estate investments later this year.
“If our overall investment portfolio continues to grow, there is a chance we will be looking at real estate again in late 2015,” Harbin said.
Kentucky Teachers invested 4.4% of its total plan assets in real estate as of the end of 2014.
It has a 5% targeted allocation for the asset class.
The pension fund made the commitments on the recommendation of its real estate consultant Aon Hewitt Investment Consulting.
Rockwood Capital, which declined to comment, is currently seeking $800m for the US value-add focused Partners X.
Targeted net IRR is projected to be 12-14%.
Rockwood, in previous funds, has placed leverage in the range of 70%.
The manager is targeting San Francisco, Los Angeles, Boston, New York, South Florida and Washington DC for the fund.
A mixture of office, residential, retail, hotel and mixed-use assets will be bought by Rockwood, alongside local operating partners.
Rockwood will invest re-lease, reposition and redevelop properties, as well as invest in new developments.
Kentucky Teachers is aiming for international exposure via its commitment to Blackstone’s Partners VIII fund, which will invest in Europe.
The $13bn fund will invest in large and complex transactions in the major property classes.
