UNITED STATES - Massachusetts Pension Reserves Investment Management Board is planning to conduct an in-depth analysis of its real estate securities programme in 2009.

The pension fund's REIT portfolio performed poorly in 2008, and yielded a -37.75% return, as a result of the credit crisis and the global economic slowdown which has impacted both stock prices and earnings projections.

Its real estate consultant Callan Associates will now analyse several elements of the REIT portfolio, including its strategic and manager structure, its international versus domestic exposure, the diversification benefits within the REIT portfolio and its position within the fund's overall real estate portfolio.

Mass PRIM is currently invested through three US REIT managers and the returns in 2008 through these managers were -35.08% for Urdang, -34.04% for INVESCO and -45.09% for Wellington, compared with a -37.73% return on its benchmark, the NAREIT Equity REIT Index.

The pension fund has also held investments through its international REIT managers - European Investors and RREEF - since February 2008.

European delivered a 45.1% ex-US negative return for the pension fund last year against a -52% return on its FTSE EPRA NAREIT index benchmark, while RREEF's global REITs portfolio has returned -45.16% its inception in February, albeit this has outperformed its benchmark, the FTSE EPRA NAREIT Index, by 25.6%.

Mass PRIM revealed in its February board meeting there were some writedowns in its direct private real estate portfolio

In its analysis of 76 properties in the fourth quarter of 2008, Cushman and Wakefield and Mass PRIM's private real estate managers found the value of the real estate investments decreased by $471.1m. while the assumed cap rates increased, on average, by around 100 basis points.

The pension fund's investment staff have also projected flat to lower rent growth over the next two years and increases in vacancy, downtime and concessions.

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