Public Employees Retirement Association of New Mexico has approved a $70m (€64.5m) commitment to Quadrant’s Enhanced Debt Fund.
Joaquin Lujan, director of rates and credit for New Mexico PERA, said: “We think that there is a strong need in the marketplace for new debt capital on high quality assets and Quadrant has been a strong manager in this sector.”
The $700m fund, managed by Quadrant Real Estate Advisors, is due for a final close in mid-2016.
The fund is the first investment product offered by the manager with this structure. All of its previous capital raising activity was through separate accounts with institutional investors.
The manager is targeting high single-digit to low double-digit returns for the strategy, which will originate new loans on existing US, core assets in the office, industrial, retail and apartment sectors.
Loan-to-value ratios will vary from 50% to 75%.
New Mexico PERA will continue to invest in real estate next year.
“I would think that the amount of activity for next year would be similar to what we committed to this year, which was $240m,” said Lujan.
The pension fund has capital available in the asset class due to a new targeted allocation established in April last year 2014. The allocation was moved from 3% to 5%.
The pension fund has invested around 3.5% of its $14.2bn of total plan assets in real estate. The investor typically places capital in real estate through both domestic and international funds.