UNITED STATES - The $11.1bn (€7bn) Maine Public Employees Retirement System has increased the size of its targeted allocation to real estate from 5% to 10%.
The amount of new capital that would be available to invest in the asset class is around $500m and the allocation could then be invested over a two- to five-year time horizon, according to Andrew Sawyer, chief investment officer for the pension fund.
"We are right now invested at the previous allocation of 5%. We think that real estate as an asset class can still produce attractive risk adjusted returns and it's a good hedge against inflation," said Sawyer.
Maine PERS is one of a few public pension funds in the United States to approve a major increase to its real estate allocation this year as most investors have stayed with their current real estate targets or have allocated less capital for investing in 2008.
The old allocation of 5% was split into both public and private real estate.
Around 4% of the allocation was invested into core open-ended commingled funds while the other 1% was invested in public REITs, through a US REIT index fund managed by Barclays Global Investors.
Maine PERS is likely to hire a real estate consultant in the future to assist it with its future real estate strategy, so may call on the support of its general consultant, Ennis Knupp + Associates to do so, although the consultancy firm does have a real estate unit within the company.
Maine PERS is considering a variety of strategies with the new capital which include a review of private real estate and core, value-added and opportunistic commingled funds.
These funds may be invested in the United States or internationally while separate account relationships are also a possibility.
Sources say the pension fund may also looking at investing in REITs on the global stage, perhaps through another index fund or a separate account.