UNITED STATES - The Alaska Permanent Fund Corporation has increased its targeted allocation to real estate from 10% to 13%, to help cope with the impact of the financial markets crisis on its portfolio.
Alaska Permanent Fund officials believe there are going to be new opportunities to be had, despite problems in the US financial markets and the need to re-weight its real estate portfolio.
As a result, the institutional investor is turning its attention to office buildings, according to Mike Burns, executive director for Alaksa.
"We think that office building purchases will give us the opportunity for some high returns, somewhere in the range of 8-9%. We are also under-allocated to office buildings and we would like to improve this over the next few years," continued Burns.
There are few willing buyers in the marketplace at present so Alaska may be able to pick up some strong investment opportunities.
Any investments made by Alaska will be done through existing separate account real estate managers, CB Richard Ellis Investors, LaSalle Investment Management and L&B Realty Advisors.
The pension fund is seeking investment opportunities in the major gateway office markets across the US, though it already owns office buildings in larger markets such as San Francisco, San Diego, Houston, Denver and Austin.
Although it is looking to invest, Alaska Permanent Fund will have only a limited amount of capital to spend as it has now has invested 12.8% of its total plan assets in real estate.
And it already invests through a mixture of office, industrial and retail properties as well as apartments, though around 10% of the pension fund's real estate portfolio is held in public REITs with the support of its manager AEW Capital Management.
The real estate portfolio is now part of the pension fund's real assets category, which in turn accounts for 18% of the pension fund's total plan assets, alongside infrastructure and TIPS.