The Sacramento County Employees’ Retirement System (SCERS) is considering lowering its real estate allocation target to 8% from 9%, according to the pension fund’s board meeting document.
The pension fund is considering reducing its core real estate allocation from 6% to 5% to lower risk and improve portfolio yield. This would be achieved by increasing exposure to higher-yielding credit strategies, like private credit, and reducing allocations to lower-yielding or more volatile assets.
The real estate reduction would be implemented through redemptions from open-ended funds or secondary market sales of closed-end fund interests, according to the meeting document.
The final decision will be made at the board meeting on 19 March.
The allocation to value-add and opportunistic real estate sectors will remain at 1.5% each.
According to the pension fund’s investment consultant, Verus, value-add and opportunistic assets are expected to generate returns 200 to 300 basis points higher than core real estate.
Currently, real estate accounts for 6.4% of the $13.3bn (€12.7bn) pension fund’s overall portfolio.
SCERS recently committed $50m to the Sculptor Real Estate Fund V, a non-core real estate investment.
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