Los Angeles Fire & Police Pensions has approved a $40m (€29.3m) commitment to a European real estate fund managed by Standard Life Investments.

Standard Life Investments would not comment on the commitment or the fund’s strategy. However, in a board meeting document, LA Fire’s adviser, The Townsend Group, said Standard Life’s European Real Estate fund is targeting non-core real estate in German cities and Paris, Copenhagen and Stockholm.

The fund is aiming to raise between €250m and €350m, with a final close expected for the closed-end fund next month, Townsend said. A net 12.5% IRR is being targeted by the fund.

The fund, according to Townsend, has three assets under exclusivity in Copenhagen, Stuttgart and Luebeck and will target office, retail and industrial properties with vacancy, short-term lease duration or in need of light refurbishment.

Townsend said reduced tolerance for risk amongst European institutional investors had resulted in a period of price discovery for properties that do not presently offer long-term stabilised cash flows. Extreme risk aversion, Townsend said, has shrunk the core property segment. As a result, assets previously considered institutional – but with minor impairments or slight blemishes – are considered non-core or secondary, creating a pricing opportunity. Townsend said there was a 12-month period to take advantage of the price differential.

LA Fire also approved a $25m commitment to the CityView Southern California Fund II. The fund invests in apartments and mixed-use complexes in Southern California.