The Health Care Fund managed by the Ohio Public Employees Retirement System is to increase its target allocation to US real estate investment trusts (REITs) from 6% to 7%, according to a board meeting report.
The change is part of a new asset allocation, which includes ending its 5% hedge-fund allocation and lower emerging market debt from 6% to 2%.
The Health Care Fund’s $694m (€579m) REIT portfolio represented 5.6% of its $12.3bn of assets at the end of September, implying an additional $130m in investment capacity.
Ohio PERS told IPE Real Assets that the new REIT allocation was designed “to provide moderate inflation protection”.
The fund’s REIT portfolio has marginally outperformed its benchmark – Dow Jones US Select Real Estate Securities Index – over the past three and five years, by 2bps and 1bps, respectively.
Ohio PERS believes the new asset allocation will help save $6.2m in annual management fees and is projected to generate a higher 10-year return of 5.6%, versus 5.48% for the previous asset allocation.