Kentucky Retirement Systems is recommending a commitment of $100m (€96.1m) to the ITE Rail Fund, the pension said.
The open-ended fund, managed by Industrial Transportation Equipment, was launched in 2014 and now has an estimated value of $2.9bn.
It fund has produced a one-year return of 11% and a return since inception of 10.7%. The long-term target net return for the fund is between 10% and 12%.
The fund has an investment strategy of leasing railcars for the transportation of over 500 dry and liquid cargoes such as food, fuel, cars, sand, metals, and chemicals in North America.
ITE owns approximately 120,000 rail cars. It has grown its business by building rail carriages, buying them through the secondary market from banks and non-bank lessors, and acquiring additional cars from other lessors.
The structure of the fund is set up with staggered leases so that no more than 15% to 20% of the leases will roll in any given year. Leverage in the fund is typically somewhere in the range of 60% to 65%.
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