The San Diego City Employees’ Retirement System (SDCERS) is backing MetLife’s core US real estate fund, which is looking to avoid gateway cities and focus on markets with higher cap rates and faster employment growth.

According to a board meeting report, the $8.1bn (€7.06bn) pension fund is investing $55m in the open-ended MetLife Core Property Fund on the advice of its consultant The Townsend Group.

Townsend supports the fund’s strategy of targeting markets like Denver, Austin, Seattle, Charlotte and Phoenix, which are experiencing employment growth and offering higher cap rates.

According to industry sources, most of the large US open-ended core funds are focused on gateway markets like San Francisco, New York City, Boston and Washington, DC.

Townsend said the Core Property Fund has outperformed the NFI-ODCE Index by 123bps for one-year and 83bps for three-years and is a top-quartile performer.

The MetLife fund had a net asset value of $2.6bn at the end of September 2018. MetLife has a $669m co-investment in the fund.

SDCERS will fund its commitment with capital from the planned sale of some of the remaining assets in a separate account managed by DWS.

There is now a total of six properties left in the separate account, three of which are planned to be sold in 2019.