GLOBAL - Nebraska Investment Council has taken some of its capital invested in REITs and had it cover a portion of its private real estate investment programme.

The most recent example of this was pulling $20m (€14.7m) out of its REIT portfolio and having it cover a portion of its $50m commitment into the Cornerstone Patriot fund.

Jeff States, investment officer for Nebraska, said: "It was never the intention of the pension fund board to have REITs be a permanent part of the real estate investment programme. 

"REITs were the first investment when the real estate asset class was established in 2004.  This was done so that some capital could be invested in real estate right away.

"Volatility in the REIT space is an issue for the pension fund."

The capital taken from REITs was 60% managed by Goldman Sachs and 40% by Heitman. 

The remaining commitment to the Cornerstone fund was funded out of cash.

Nebraska is expecting to withdraw from REITs completely by the end of 2011. This capital will be used to fund at lease a portion of commingled fund investments to be made next year.

States said: "One of the attractive features for the Cornerstone fund was that out capital would be placed into the commingled fund right away. 

"There are some other core open-ended commingled funds that have a different situation."

Nebraska had $44m left in its REITs portfolio as at the end of September.

Goldman Sachs manages $27m and Heitman $17m - both are active portfolios with a domestic investment strategy.

The pension fund now has a total real estate portfolio valued at $416m, meeting its 5% targeted allocation for the asset class.
 

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