The State of Michigan Retirement System is committing $200m (€188m) to Lone Star’s 10th real estate fund.

Lone Star is aiming to raise $6bn for Fund X, an opportunistic vehicle targeting a gross internal rate of return of 25%.

Michigan has also made two co-investments, including a $17m transaction involving a residential development project in Austin, Texas being managed by CIM Investment Advisors.

The pension fund is co-investing $15m in the acquisition of an office building in Washington DC.

The acquisition of Penmain Office will form part of a separate account being managed by Domain Capital Advisors.

Michigan is looking at a focused investment strategy for 2017 that includes the development of urban apartments and warehouses, and acquisitions of office buildings where it can add value.

The pension fund is planning to be selective and defensive with new commitments, according to a board meeting document.

It will be seeking opportunities that are shorter in duration, deliver more liquidity, produce consistent cash flow and capitalise on unique opportunities.

In 2016, Michigan’s $6bn real estate and infrastructure portfolio generated a one-year return of 10.4%, beating its benchmark, the NCREIF NPI, by 260bps.