San Francisco Employees’ Retirement System (SFERS) has hired Principal Real Estate Investors to replace Morgan Stanley Investment Management as its real estate investment trust (REIT) manager.

In a board meeting document, the $26.1bn (€24.1bn) pension fund said Principal will manage the two portfolios valued at $49m.

According to the pension fund’s investment consultant Callan, one of the portfolios – a $34m domestic REIT portfolio – underperformed the MSCI US REIT Index by 7.4% over the past year.

The second portfolio, a global REIT portfolio – benchmarked against the FTSE EP/NA Developed Index – also had a poor performance due to its lack of allocation in certain regions.

Principal, which oversees both domestic and REIT portfolios for many institutional investors, manages $7.4bn worth of US REIT relationships and global REITs totalling $9bn.

SFERS selected Principal following a search which shortlisted Cohen & Steers and Duff & Phelps.

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