Illinois Municipal Retirement Fund has approved a $138m (€100m) commitment to opportunistic investment in European real estate.

Illinois is putting €50m into Ares’ European Fund IV and the same amount into Resolution’s Real Estate Fund IV. The two commitments were the end result of a tendering process carried out by Illinois late last year. Angelo, Gordon & Co, Brockton Capital and Pramerica Real Estate Investors had all pitched for the mandate.

Ares is looking to raise $1bn for its European fund, making a $25m co-investment into the fund, which is targeting a 16% to 20% gross IRR and a 12% to 16% net IRR. The fund is focused on the UK, France and Germany. Around 80% of properties bought by the fund will require capital restructuring or repositioning as core assets. The fund will also target supply and demand imbalances.

Ares has so far invested $450m, including a €50m investment with Mount Anvil to develop residential properties in London.

Resolution Real Estate Advisors is looking to raise €400m for Fund IV, which has a target net IRR of 16%. The fund, targeting the UK, Germany, France, The Netherlands, Sweden and Poland, will buy under-managed and distressed assets at less than replacement cost and in areas of tight supply. Resolution will seek to transform the properties into institutional quality assets that can then be re-sold.

Callan Associates, the real estate consultant for Illinois, said looming debt coming due by real estate lenders over the next years, supply and demand issues in select markets and improving economic indicators select regions of Europe were driving the decision to invest.