Ohio Public Employees Retirement System’s (PERS) $12bn (€11.1bn) real estate portfolio has generated negative returns over the past 12 months, which its investment consultant has attributed to rising interest rates and falling asset values.

NEPC disclosed in a meeting document that Ohio PERS’s real estate investments recorded -0.4% in Q3 this year, -4.1% for the first nine months of 2023, and -2.8% over 12 months to the end of Q3.

The NCREIF ODCE Index, an industry benchmark for the US core real estate market, posted a -2% gross return for Q3, including a -2.9% fall in capital values.

Other US pension funds have also recorded negative returns, including the California State Teachers Retirement System, which posted a -0.5% return on its $51bn real estate portfolio for the 2023 fiscal year, and the California Public Employees’ Retirement System (CalPERS) which recorded a -3.1% return on its real assets portfolio for the 12-month period ending 30 June 2023.

CalPERS’s real assets portfolio comprises $56.8bn of real estate, $14.4bn of infrastructure assets and $300m worth of forest land.

NEPC said rising interest rates was putting pressure on asset values, but it said the market correction could generate attractive investment opportunities in real estate debt.

The consultancy said that high interest rates, coupled with impending loan maturities and a retreat by traditional lenders, had elevated return expectations for real estate debt comparable with those associated with value-add real estate equity.

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