US - Los Angeles County Employees Retirement Association has added a co-investment option to its real estate investment strategy.
This will be the first time the pension fund has had a co-investment option, having taken this action at its board meeting on April 25 with assistance of its real estate consultant, The Townsend Group.
Investment staff at LACERA will now be able to act on co-investments of less than $50m ($36.6m euros). The only exception to this is for international co-investments which still need board approval and make this a non-discretionary investment program, said John McClelland, principal investment officer for real estate at the LACERA fund.
"This gives us another way for us to invest in real estate," said McClelland.
"There are some commingled funds we have invested in that have this feature. One of these is Urban America Fund II. There also will be other commingled funds that we will be investing in the future that have co-investment opportunities," he continued.
At this stage. "no certain amount has been set aside" in terms of capital allocated to co-investments, said McClelland.
But the pension fund will begin a search this summer to hire a pool of independent real estate fiduciaries. These firms would be responsible for looking at potential commitments for co-investment opportunities and assignments will be handed out based on the strength and weaknesses of the firms in the pool.
Co-investing is typically only available to pension funds that have already committed some capital to a commingled fund so this investment structure allows pension funds to participate in a unique transaction a real estate manager is completing.
Most commingled fund managers do not consider co-investment capital as part of the equity raised for a commingled fund but some of the real estate managers which allow co-investing are Heitman, Rothschild Realty and Morgan Stanley Real Estate.