San Francisco Employees to pursue co-investment strategy

San Francisco Employees’ Retirement System is to make real estate co-investments through separate accounts.

In a board meeting document, the US pension fund said the move would help lower management expenses and enhance net returns.

The strategy will see San Francisco consider managers on a local as well as a global basis.

San Francisco, which currently only uses separate account managers for traditional core real estate investments, is looking for a global mixture of core, value-added and opportunistic strategies.

The pension fund has existing core separate account relationships with Invesco Real Estate and Deutsche Asset & Wealth Management, which invest in a variety of property types in the US.

San Francisco, which has a 12% allocation to real estate, is yet to indicate how much capital it will allocate to the strategy.

Direct real estate investments are one potential co-investment strategy being considered, including the potential purchase of the investor’s own headquarters.

By owning the building, San Francisco Employees’ would gain increased control and avoid the inconvenience of a third-party lease, it said. 

The strategy would not only cut operating lease expenses but achieve a yield on investment.

The property could be bought or redeveloped.

Co-investments could also give the pension fund more control over real estate investment by placing capital with other investment entities on specific individual transactions.