California State Teachers’ Retirement System (CalSTRS) is planning to increase its real estate allocation target from 13% to 14% due to market volatility.
In September last year, IPE Real Assets reported that the pension fund had a long-term plan to increase its real estate target allocation from the current 13% to 15% and reduce its allocation to public equity.
The changes were to help improve diversification, enhance portfolio down-side protection and take advantage of the risk-return profile of private assets as outlined in the investor’s ”collaborative model” initiative.
In a meeting document, the $243bn pension fund’s investment consultant Meketa Investment said the increase being made now is mostly due to the private real estate’s allocation increasing as a proportion of the overall portfolio due to volatility.
CalSTRS said in the meeting document that its core real estate portfolio which amounted to $22.1bn as at September last year had dropped to $21.7bn by the end of March this year.
According to the latest IPE Real Assets Top 100 Real Estate Investors 2020, real estate represents $35bn of the pension fund’s $243bn portfolio.
Industry experts believe real estate values will decline more severely during the second and third quarters as a result of the COVID-19 pandemic.
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