The New Jersey Division of Investment could increase its targeted allocation to real estate from 4.25% to 6%.
The US pension fund is considering the increase, which would see it invest more capital in value-add real estate.
The strategy, part of the pension fund’s 2016 Annual Investment Plan, could be approved at its 27 May board meeting.
In a board meeting document, New Jersey said cap rates for core real estate were near cyclical lows.
The pension fund believes value-add opportunities are currently a better investment, offering a favourable long-term return profile and substantial diversification.
Value-add investment could see the fund buy existing assets in need of improvement, or invest equity in new development projects.
New Jersey is also considering an allocation of up to $100m (€91.5m) to KSL Capital Partners’ IV fund.
The pension fund is now conducting due diligence on the $2.25bn value-add fund.
The Public Employees Retirement Association of New Mexico recently made a $60m commitment.
Partners IV will make debt and equity investments in real estate and related travel and leisure businesses, including hotels and destination resorts, golf courses and high-end athletic clubs.
The focus of the fund is under-managed or under-valued businesses and properties with high barriers to entry in the US and abroad.
New Jersey said KSL generally targets the mass affluent leisure customer, which includes 26m US households earning more than $100,000 in annual income.
During the financial crisis, resort leisure demand remained resilient, with only a 3% fall in occupied-room nights from peak to trough.
