NORTH AMERICA – The Massachusetts Pension Reserves Investment Management Board (Mass PRIM) has approved a 10% allocation to international direct private real estate through its separate account managers.
Tim Schlitzer, senior investment officer for real estate and timberland, said: "We made this allocation and some other changes to our investment guidelines to give our managers more flexibility to investment capital.
"Some deals in the past we couldn't [go] after because they were not part of our current parameters."
The allocation will focus on Europe and Asia.
"For Europe," Schlitzer said, "we would be talking about deals in the UK and Germany."
These investments are to be funnelled through Mass PRIM's separate account managers – JP Morgan Asset Management, TA Associates Realty, Invesco Real Estate, LaSalle Investment Management and AEW Capital Management.
Mass PRIM now has $950m (€714m) of equity left to invest in new transactions before it reaches its 10% targeted allocation to real estate.
The pension fund's current $4.4bn real estate portfolio makes up 8.2% of total plan assets.
Another major change to its investment guidelines is that Mass PRIM will able to invest as much as $250m of equity in a single transaction.
The previous cap had been $150m.
Dan Stenger, a principal with the firm, wrote in a board document that this change would give its managers access to larger deal.
The purpose of this guideline is to avoid concentration risk, which has caused PRIM to pass on deals in the past that would have accounted for less than 5% of the private real estate portfolio.
Mass PRIM made several other changes.
One was to move its value-added component from 10% to 15%.
It also will not allow any additional speculative development except for apartments.
The pension fund will also be allowed to invest in alternative property types, including senior housing.
It already invests in the traditional property types of office, industrial, retail and apartments.
