The New Mexico Educational Retirement Board could invest as much as $160m (€146m) in real estate during 2016.
Funding will be moved out of the pension fund’s existing $300m REIT portfolio into private real estate.
Bob Jacksha, CIO at New Mexico, said: “Public REITs have a strong correlation to private equity, and investing this capital into private real estate will give our fund additional diversification.”
The pension fund is looking at 3-4 commitments to real estate during the current calendar year.
New Mexico typically makes commitments of approximately $40m.
It has already approved its first commitment, allocating $40m to Lone Star’s Real Estate Fund V.
“We have invested with Lone Star in several funds in the past,” Jacksha said.
The pension fund has previously backed Lone Star Funds VII, VIII and IX, as well as Real Estate Fund II.
“All of our investments in these funds have produced returns of 20% or better,” said Jacksha.
New Mexico feels Fund V will give the pension fund more international exposure to real estate.
The fund will be investing in the US, Europe and Japan.
New Mexico has an existing real estate portfolio that has reached its 7% targeted allocation.
The pension fund’s REIT portfolio is split, with around $200m of REIT assets managed in a separate account by Brookfield Asset Management.
The scheme manages the rest of the portfolio internally in an index fund.
All of the capital is invested in a domestic REIT strategy.