San Bernardino County Employees’ Retirement Association (SBCERA) is considering lowering its real estate allocation as it struggles to find opportunities in the asset class.
A board meeting report shows that the pension fund could reduce its target allocation from 9% to 7% as part of a wider asset allocation review being conducted by investment consultant NEPC.
Chief invesmtent officer Donald Pierce said SBCERA was “having a hard time finding enough investment opportunities in real estate… to be able to get to our 9% allocation”.
He said there were “more compelling investment opportunities in emerging market debt”. SBCERA is considering raising its allocation to emerging market debt from 6% to 8%.
If the pension fund was to reduce its target real estate allocation it would still have a significant amount of capital to invest in the asset class. Even the reduced target of 7% would mean SBCERA could allocate $300m of capital to new real estate investments.
At the end of March, the $406m real estate portfolio represented 4.1% of pension fund’s $9.9bn in total assets – still below its current target and the proposed reduced target.
But the reduction to its target would require it to drop its core real estate target from 6% to 3.5% and raise its non-core target from 3% to 3.5%.
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