Ohio Public Employees Retirement System could become under-allocated to real estate as it acknowledges the difficulty of investing in the asset class today without taking undue levels of risk.

In a board meeting report, the $83.7bn (€68.7bn) pension fund said: “The challenge for staff is to find new opportunities that have desirable expected returns at acceptable levels of expected risk”.

Its investment consultant Aon also stated in the report that “redeploying capital is more challenging at current point in the cycle” without adding more risk and that this might “cause allocation to fall below target”.

Ohio PERS’s most recent figures show that its private real estate allocation fell from 9.42% at the end of June last year to 9.16% at the end of Septmber, below its 10% target.

The pension fund had planned to make more than $1bn of direct real estate acquisitions and invest $500m in closed-ended real estate funds in 2017. But figures for the first three quarters of the year show that it only bought $341m of direct property and failed to make any fund commitments. It did manage to redeem $150m from core open-ended real estate funds.

Ohio PERS was actually a net seller during the nine-month period, disposing of $361m of real estate held in separate accounts.

The pension fund said that, since 2015, it had “sold assets at high prices and realised gains”, capitalising on “excess demand for stablised, core properties”.

Ohio PERS had expected a correction in the US real estate market in 2017, but it now believes the market will continue to plateau, according to the report. “However, staff does not see a near-term catalyst that would cause property values to decline,” it said.

For future investments, the pension fund is focusing on debt and preferred equity, select development opportunities, and secondary-market transactions.

“Staff believes these strategies will enable the portfolio to achieve its performance objective and also provide a degree of downside protection during a market correction,” it said.