UNITED STATES - Los Angeles County Employees Retirement Association has approved an annual real estate investment plan for 2007/2008 which will see property  worth $700m sold and as much as  $900m (€648m) invested through a domestic separate account strategy.

John McClelland, principal investment officer for real estate for LACERA, noted the pension fund is one of the few major pension funds in the United States to still have an active separate account investment program, as many pension funds are placing capital into the market through joint ventures or commingled funds.

"We believe in the separate account strategy. The managers that we currently work with have performed very well for us and they have allowed us to achieve a great deal of diversification within our real estate portfolio," said McClelland.

In order to fund the asset shift into indirect investment, LACERA will sell $700m in real estate assets.

The pension fund has confirmed it will allocate at least $600m for the separate account program and split $150m into core real estate, $300m for value-added and $150m into opportunistic real estate.

A further $300m could be used on an ‘as-warranted' basis as the fund's real estate managers will have access to this capital should the initial $600m all be invested.

Six managers have been selected to manage assets for the separate account program RREEF, TA Associates, INVESCO Real Estate, Cornerstone Real Estate Advisers, Emmes and Capri Capital Advisors - but LACERA has rule stipulating no one manager can control more than 35% of the pension fund's total real estate portfolio. And both RREEF and TA Associates are within $100m of this figure.

Each of the managers has investment discretion within the parameters of its individual strategy so should there be a deal outside of the strategy, the pension fund then needs to approve the transaction.

Most of the capital will be invested in the four main property types of office, industrial, retail and apartments but Cornerstone has a mandate to include hotels.

Similarly, the pension fund also states emerging managers cannot oversee more than $300m of total assets so its chosen emering real estate managers, Emmes and Capri Capital, have at least $100m to invest before they would reach that limit.

Topics