In a bid to save on fees, Massachusetts Pension Reserves Investment Management Board (Mass PRIM) plans to make $750m (€629m) of internally-managed, direct real estate investments this year.
Mass PRIM is one of the few pension funds in the US to have developed a direct real estate investment programme that does not rely on external investment managers.
The $71.7bn pension fund made its first in-house direct deal in December 2016, acquiring 21 acres of land and three office buildings in Silicon Valley for $112m.
It has allocated $300m for the strategy in 2018, which with leverage will give it $750m of purchasing power.
The pension fund said in a board meeting report that it expects the strategy to lead to a significant saving in fees.
The allocation will be reviewed on an annual basis.
Most of the deals this year are likely to be in East Coast markets, with Mass PRIM having reviewed a number of potential deals in Miami, New York, Boston and Tampa. It will look at core and non-core assets.
The State Teachers Retirement System of Ohio is another example of a US pension fund that manages direct real estate investments internally, but according to industry sources both are rare examples.
Timothy Schlitzer, who oversees Mass PRIM’s real estate and timberland investments, told IPE Real Assets last year that direct investment not only saves on fees, but also improves the investment process by generating a wider range of market information. “That helps us ask better questions,” Schlitzer said.