UNITED STATES - Los Angeles Fire and Police Pensions has ended its relationship with Adelante Capital Management as a REIT manager after the firm massively underperformed its benchmark.

Adelante underperformed the Wilshire REIT index as a benchmark by 346 basis points, giving it a consistent fourth quartile ranking over one, three and five-year periods by the end of 2008, according to the pension fund's real estate consultant, The Townsend Group.

Since inception of the relationship in March 2006, Adelante's underperformance versus the benchmark had cost the pension fund approximately $4.5m, even though the investor has paid an additional $1m in fees to Adelante.

The firm was given a $70m (€52m) allocation at the time, but that value had shrunk to $29.3m by 23 March 2009.

LA Fire and Police has chosen to transfer the assets in the Adelante portfolio to Principal Global Investors as a result - one of its two other REIT Managers - as it is understood to have had the best performance of the three REIT managers and outperformed its benchmark by 651 basis points in 2008, as well as outperforming its benchmark by 333bp since inception.

This kind of performance has led the pension fund to extend the contract with Principal for another three years as well as the £33.7m agreement with Morgan Stanley Investment Management, its third REIT manager, although it was placed on watch in March for underperforming its benchmark by 50bp in 2008.

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