Alaska Retirement Management Board (ARMB) intends to create new real estate allocations for non-core and debt, and also increase its infrastructure target allocation as part of a review of the pension fund’s real assets portfolio.
Callan, ARMB’s investment consultant, proposed in the pension fund’s meeting document that a 5% allocation for both real estate debt and non-core real estate should be created within its real assets portfolio.
According to the pension fund, factors like ”higher base rates, spreads, and more constrained lending” create a good entry point into real estate debt, a sector that ”generates high current income”.
To create the new real estate debt allocation, ARMB plans to move its $198m (€184.5m) investment in the Fidelity Real Estate High Income strategy from its fixed income portfolio into the real assets portfolio.
In addition, the pension fund, via Callan, also intends to seek out two private real estate debt strategies in the near future.
For the non-core real estate strategy, the plan would be to allocate between $60m and $70m to value-add fund opportunistic funds.
The pension fund has in the past made some non-core real estate investments, but has not had a dedicated targeted allocation for the sector.
ARMB said it also plans to increase its infrastructure exposure – which sits within the real assets portfolio – from 15% to 20% in the near future.
The planned increase to infrastructure allocation is expected to be funded by reducing the pension fund’s core real estate, real estate investment trusts, and the farmland portfolio within the real assets portfolio, each by 5%.
Part of the pension fund’s plan for its core real estate portfolio involves winding down its $698m core separate account with UBS Realty. ARMB is transferring the apartment assets in the UBS Realty separate account to Sentinel as part of the plan.
The pension fund also wants to rebalance its core real estate fund exposures over time in a bid to keep it at 30% of the real assets portfolio.
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