CalPERS continues to increase its retail property exposure via $6.4bn platform

California Public Employees Retirement System (CalPERS) continues to invest billions of dollars in US shopping malls, despite widespread weakness in the country’s retail property market.

The $353bn (€297bn) pension fund has approved a new $460m commitment to its $6.4bn joint venture with retail specialist Miller Capital Advisory, according to a board meeting report.

The latest investment comes less than 12 months after it added $250m to the co-investment partnership, known as Institutional Mall Investors.

CalPERS is the majority owner of the assets and Miller Capital serves as investment manager.

CalPERS did not respond to questions about the rationale of increasing its exposure to US retail property at a time when shopping centres are under pressure from the rise of online consumerism.

But while retail property in general is suffering, some parts of the market have held up well, as retail owners of quality assets have adapted.

Other US pension funds have sought to increase their exposure to US retail in recent months. Late last year, Maryland State Retirement and Pension System hired Morgan Stanley to invest tactically in undervalued shopping mall real estate investment trusts (REITs). Others have invested in Asana Partners’ debut fund, which invests purely in US retail. 

Institutional Mall Investors focuses on core, fashion-oriented retail properties, including shopping centres and has a portfolio encompassing 19.5m sqft of retail space.

The portfolio has delivered a 24.4% net internal rate of return for CalPERS.

Real estate accounts for around $30.5bn of the pension fund’s total assets, placing it seventh in IPE Real Assets’ Top 100 Real Estate Investors 2018.

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