New Mexico State Investment Council could allocate up to $200m (€180.3m) in non-core real estate.
The sovereign fund is likely to approve its 2016 real estate investment plan at a 28 July board meeting.
New Mexico, which will invest only through closed or open-ended funds, plans to commit to 3-4 funds in 2016.
Vince Smith, deputy investment officer at New Mexico, said there were “strong investment opportunities available in strategies that offer a little more risk”.
The sovereign wealth fund is looking to invest in industrial and office in Europe and the US, as well as retail in the latter.
“Our pacing assumptions assume our core portfolio is fully established by 2016,” Smith said.
New Mexico will also invest some capital in Europe.
“At this point in the market cycle, Europe is still two years beyond the US as far as the economic recovery goes, and this should produce some compelling investment opportunities,” Smith said.
New Mexico stated in its annual investment plan that, in Europe, office and industrial assets were attractive, while the apartment sector was not.
New Mexico will work with its real estate consultant, The Townsend Group, to select a manager.
The sovereign wealth fund recently re-hired Townsend for another four years.