The New Mexico State Investment Council (SIC) has increased its real estate allocation from 10% to 12%.
Vince Smith, deputy state investment officer at New Mexico SIC, said: “It was about two years ago that we reached our previous targeted allocation.
“We still wanted to continue to invest in the asset class and to do that we needed a new allocation.”
New Mexico SIC is accommodating the new allocation by reducing its fixed income and private equity allocations by one percentage point each, according to a board meeting document.
The sovereign wealth fund is planning to invest $300m (€254m) in real estate in the next 12 months. Around $50m will be allocated to core investments.
“We have already established a strong core portfolio through several open-ended funds and there are better investment opportunities in non-core given where we are in the market recovery,” said Smith.
New Mexico SIC is likely to make one core real estate commitment and three to five commitments to non-core strategies. It typically invests £50m to $100m in non-core funds that target double-digit returns.
The amount of capital to be invested in non-core will also be increased to $300m annually over the next five years, once the investments for the fiscal year ending July 2018 are completed.
New Mexico SIC has approved a $100m commitment to Carlyle Realty Partners VIII, an opportunity fund.
“We think that Carlyle is a very high-quality firm,” said Smith. “We also like that the manager is making a sizeable co-investment into the fund of $200m.”