REAL ESTATE - The Missouri Local Government Employees Retirement System has established a real estate allocation for the first time. The amount that was approved is 5% of its total assets.
The pension fund made this decision at its recent board meeting, when it also created a 5% allocation for private equity.
The pension fund’s chief investment officer Brian Collett said: "We had a couple of reasons in mind for creating a real estate allocation at this time. One was to improve the diversification on our overall investment portfolio. The other was to lower the correlation to the public markets."
Missouri Local Government plans to fund the allocation to private equity allocation first. This could put off attending to the real estate programme until next year. Each of the two asset classes will have $200m to invest.
The plan for real estate for Missouri Local Government is to start out investing in commingled funds. This is a strategy that most pension funds will use when creating a new real estate portfolio. Many investors end up choosing to invest in core open-ended commingled funds. This can lead to achieving diversification quickly.
Core commingled funds have a safe and secure investment strategy. For the most part, they own an established portfolio of office, industrial, retail and apartments. These assets are located in major metropolitan areas around the US.
Pension funds will secondarily consider a value-added commingled fund strategy after core. This is to invest either in properties that need to be improved or non-core property types like medical office buildings or senior housing.
Missouri Local Government has total assets of $3.8bn. which currently is invested in a variety of asset classes, including equities, fixed-income and timber.
