Connecticut Retirement Plans and Trust Funds plans to invest in European real estate, with an opportunistic approach, according to a board meeting document.
The pension fund stated that investment staff may seek to expand international exposure over the next few quarters to take advantage of distress in European markets. The fund is planning to invest through commingled funds and target net returns in the high teens.
The Connecticut State Treasurer’s Office believes that European real estate markets are three to four years behind the US recovery and investment would not be unlike investing in the US in 2009 and 2010. An improving economy, banks willing to offload distressed assets from their portfolios – along with a higher regulatory environment in the banking industry – make investment in Europe attractive.
Connecticut’s consultant, The Townsend Group, gave an overview of the European market in a board meeting document. Investment in Europe in 2013 totaled $161bn and is tipped to be exceeded this year, with distressed and overleveraged/recapitalisation transactions set to boost figures.
Connecticut’s international real estate portfolio currently accounts for 15.1% of its total real estate book, with a long-term goal set at 20%.
In the third quarter of last year, the fund had $264m (€192m) to commit to real estate before reaching its 7% allocation for the asset class.
Connecticut has previously invested in two exclusively European funds. A commitment of up to $50m in Blackstone Real Estate Partners Europe III was made in 2008 and more recently $50m was put into the Marathon European Credit Opportunity Fund in 2012.
In the US, Connecticut has recently approved a $30m commitment to the Gerding Edlen Green Cities II fund. The $250m value-add fund invests in office and apartments in US gateway cities.