The Minnesota State Board of Investment has approved a staff recommendation that the fund commit the smaller of $50m (€44.7m) or 20% of the fund to an Angelo Gordon Asia fund.
The commitment to the AG Asia Realty Fund III marks the Minnesota SBI’s second property investment with Angelo, Gordon & Co (Angelo Gordon), an opportunistic manager.
The pension fund has previously committed $100m to the manager’s AG Realty Fund IX and has funded $22m of the allocation, according to the SBI Alternative Investment Commitment Report for 30 June.
AG Asia Realty Fund III achieved a first close in March 2015 at $266.8m, according to data from private equity analytics platform Bison.
Industry sources indicate that Angelo Gordon is targeting $750m in assets for Asia Realty Fund III.
The manager previously raised $525m for the 2006 vintage AG Asia Realty Fund I and reached a first close of $414m in 2010 for AG Asia Realty Fund II, according to Bison data.
Angelo Gordon invests around $26bn in property, property debt, credit and multi-strategy alternatives and has offices in Hong Kong, Seoul and Tokyo.
Late last year, it promoted Seoul-based Steven Cha to co-portfolio manager of Asian property funds.
Cha, one of Angelo Gordon’s first Asian property hires in 2006, headed Korea and Japan property investment.
Jon Tanaka, who joined the manager in 2009, was named the new head of Japan Real Estate.
According to Angelo Gordon’s second-quarter Capital Markets Perspective, “vacancy in the Tokyo office market continued to improve” early in 2016, “with rents increasing by 4.5% year on year.”
Office vacancy declined to around 4%, a level last seen in 2008, and just above the 2006 low of less than 3%.
Cap-rate spreads for grade-A office buildings in central Tokyo “continued to widen to nearly 400 basis points” as Japanese government bond yields fell into negative territory.
In Seoul, “transaction volume got off to a strong start in 2016,” while “office vacancy remained high at 11%”.
Terms of the investment in Asia Realty Fund III are subject to final negotiations between the manager and Minnesota.
The pension fund managed $80.9bn as of the end of June.