New Mexico State Investment Council plans to invest $200m (€175m) in non-core real estate this year and could increase its target allocation.
Vince Smith, deputy state investment officer for New Mexico, said the sovereign wealth fund plans to commit the capital to commingled funds over the next six months.
He said the board will meet in August to discuss an asset allocation review of the entire investment porfolio.
”There is a possibility that we could be increasing our target allocation for real estate,” he said.
The sovereign wealth fund currently allocates 10% to real estate.
New Mexico recently made a new real estate investment, committing $50m to Berkshire Multifamily Value Plus Fund IV.
Berkshire Group had raised $209m for the US apartment fund at the end of May, including an $8.8m co-investment.
Its strategy is to invest through Freddie Mac multifamily debt programmes, developments, recapitalisations and acquisitions of value-added assets.
Smith said: “Even though there has been a lot of apartment complexes completed this year on a national level, I still think there is still very strong demographics for apartments.
“The demand for this type of housing is a at a high level.”
The fund has already carried out three transactions worth a combined $66.2m – relating to Freddie Mac debt programmes and a develoment project in Dallas – and has another $25m deal under contract.
“We think that there is a portfolio of assets already in the fund which is something that we like,” said Smith.
A final close on the fund is expected this summer. Berkshire is aiming for up to $300m.
Target net returns for the fund are 11% to 12.5%.