Texas Municipal Retirement System is to be a seed investor in the Walton Street Real Estate Debt Fund as it makes $175m (€127m) in new real estate commitments.

The pension fund has allocated $100m to the vehicle managed by opportunity fund manager Walton Street Capital and will save between $250,000 and $500,000 in annual management fees.

Walton Street is aiming to raise $500m from investors for its first debt fund, with a first closing expected in the second quarter of the year and final close in the second half of 2015.

The fund will target returns of 11% to 13% gross IRR and 9% to 11% net IRR, with an average debt-to-equity ratio of one-to-one across the portfolio. Investments will include whole loans, mortgage participations and mezzanine loans secured by US real estate and other real estate-related assets, across the office, industrial, retail, apartment and hotel sectors.

Texas also respectively made follow-on commitments of $50m and $25m to the Invesco US Income Fund and Rubenstein Properties II, respectively.

The core, open-ended US Income Fund has $300m of initial equity, with growth to $1bn planned for the next three years through acquisitions in the US. The fund is aiming for returns of 250 basis points above NFI-ODCE income returns on a gross and net basis.

The value-added Rubenstein Fund II is aiming for a total equity raise of $500m to $750m. The closed-ended fund will focus on US offices with a targeted net total return of 12% to 15%.

The three commitments are part of a $600m allocation the pension fund has made for the asset class this year as it looks to core, value-added and opportunistic real estate sectors.

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