UNITED STATES - New Mexico Educational Retirement Board is currently transiting out of public REITs and reinvesting the capital via a private real estate strategy.
It recently approved commitments of $25m (€17.6m) each to Lone Star Fund VII and Lone Star Real Estate Fund I as part of the private real estate strategy, along with $30m to The Lionstone Group's Cash Flow Real Estate Fund.
New Mexico Educational previously worked with a 5% targeted allocation to real estate and invested all of the capital in a public REITs strategy but at the end of 2007, the pension fund board decided that public REITs were too volatile and felt private real estate would be a better fit to its needs.
The pension fund currently has 3.4%-3.6% of its $6.6bn in plan assets invested in public REITs but is working with Lone Star and The Lionstone Group to get the contracts signed on the commitments to their commingled funds.
New Mexico Educational is understood to have talked conceptually about hiring external managers to take of a limited REITs position, however no formal action has been taken as yet.
The pension fund's current position in REITs has been invested in an index strategy. The benchmark for this strategy is the Wilshire REIT Index.
The Lone Star investment is seen as opportunity commingled funds while the Cash Flow Real Fund is first allocation to a core investment fund, albeit more core investments are likely to follow.
ORG Real Property acts as the pension fund's real estate consultant.