UNITED STATES - Los Angeles County Employees Retirement Association has approved a new returns benchmark for investing in real estate.

The pensions body has switched its old benchmark of the Consumer Price Index plus 5% to a new benchmark of the NCREIF Property Index minus 25 basis points, according to John McClelland, principal investment officer for real estate at LACERA.

"The main reason for doing this was to move to a benchmark that was more reflective of market cycles and returns from equity investments in a broad portfolio of domestic real estate."

LACERA does not change its real estate benchmark very often as the last time it used a difference benchmark was 15 years ago.

LACERA is facing the same issues with the denominator affect that many other pension funds in the United States are having to tackle.

It is now over-allocated to real estate as an asset class, as the pension fund has a targeted asset allocation for real estate of 10% but was technically holding 14% of its assets in real estate at the end of 2008 because other assets, such as equities, have devalued so heavily through market turbulence.

This also means LACERA is unlikely to make any new commitments to real estate in 2009, said McClelland.

"There is a strong possibility that we will have a very quiet year in real estate investing," he said.