UNITED STATES - Maryland State Retirement Agency is doubling its targeted allocation for real estate from 5% to 10%.
Dean Kenderdine, executive director of the pension fund, told IPE Real Estate: "It's our opinion that many real estate investments have low correlations to other asset classes like fixed income and equities. We have a strong existing real estate program in place with good managers and a good consultant so now is a good time to expand the program."
The amount of new capital available to invest in real estate in the future is likely to be between $1.7bn (€1.07bn) and $2.2bn, although pension fund officials figuring it will take several years to invest this capital.
The decision to increase its real estate allocation is part of wider asset allocation study, but will now see Maryland State work with its real estate consultant, PCA Real Estate, to invest in a mixture of public and private real estate strategies.
The public real estate targeted allocation will be expanded from 1.5% to 3% of total plan assets, to give the pension fund around $300m of new capital to invest in REITs.
Maryland State is unlikely to hire any new REIT managers at this time, instead the new capital will be split with the pension fund's two existing managers - Morgan Stanley Real Estate and LaSalle Investment Management.
The current value of its REIT portfolio is $728m as Morgan Stanley has an international investment mandate who portfolio is currently valued at $391.9m, and LaSalle runs a domestic REIT portfolio for Maryland valued at $336.1m.
Maryland State is looking at investing in private real estate through US and international core, value-added and opportunistic strategies, either as commingled funds or separate accounts.
At of the end of February 2008, Maryland State had a total real estate portfolio valued at $1.9bn while total plan assets stood at $37.5bn.
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