New Mexico State Investment Council (SIC) has set a $1bn (€894.5m) real estate investment target for fiscal year 2025, most of which will be allocated to non-core.
For the fiscal year that began 1 July, the sovereign wealth fund expects a significant portion of its real estate pacing amount to be invested in non-core deals as part of a long-term strategy to shift the current real estate portfolio from its current composition of 60% core and 40% non-core to a target allocation of 60% non-core and 40% core.
Another reason for the increased interest in non-core real estate is New Mexico SIC’s desire to wait until core valuations fully reflect the current market conditions. This adjustment could take up to six quarters from the market bottom.
The sovereign wealth fund is also considering allocating up to 10% of its $3.6bn real estate portfolio to real estate investment trusts (REITs) as it believes the valuation gap between public and private real estate assets suggests that investing in public REITs could be a good short-term strategy.
New Mexico SIC has not yet approved the addition of REITs to its portfolio. If the fund decides to pursue a REIT investment programme, it will likely initiate a manager search in the future.
The Townsend Group, New Mexico SIC’s real estate consultant, will recommend new private real estate commitments to the investor. Each commitment is expected to be at least $100m and could larger if a co-investment option is available.
New Mexico SIC intends to allocate more capital to industrial real estate and seek additional commitments in multifamily housing, while maintaining an underweight position in conventional retail and office properties.
The sovereign wealth fund plans to actively invest in funds operating in the US, Europe and Asia on a long-term basis.
To read the latest IPE Real Assets magazine click here.
