Florida State Board of Administration (SBA) is planning to increase its real estate allocation target from 10% to 12%.

Following an asset allocation review, investment consultant AON is recommending that Florida SBA adjusts its allocation to some asset classes including lifting that of real estate to help improve the overall risk-adjusted returns for the pension fund.

The proposed increased allocation for real estate is expected help the pension fund by offering more diversification, stronger income-oriented returns, and an inflation hedge.

The proposed new allocation for real estate is expected to be done by increasing the core real estate segment of the portfolio from 7.65% to 10% and increasing non-core real estate from 1.35% to 2%. Real estate investment trusts, which currently have a 1% allocation, is expected to be wiped out.

The proposed allocation increase is expected to be presented for board approval at a meeting scheduled for 23 August.

Florida SBA also disclosed in a meeting document that it made a $200m equity contribution via a separate account to buy two industrial assets worth $369m in a deal was sourced and completed by MetLife Investment Management.

The properties involved were a core asset located in Rock Hill, South Carolina, and a non-core property in Wesley Chapel, Florida.

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