Ohio Bureau of Workers considers doubling real estate allocation

The Ohio Bureau of Workers’ Compensation is considering doubling its real estate allocation from 6% to 12%.

The institutional investor could allocate between $600m and $700m (€530m-620m) to funds run by existing managers and focused on US real estate.

A new allocation of 3% for core-plus investments could also be made as part of the move, which will be considered at a board meeting next month.

The allocation would include respective increases of 4.5-7% and 1.5-2% for core and value-add funds.

Ohio BWC, which has a $1.4bn real estate portfolio, views core-plus to be properties bought at discount and in need of value-added capital improvements with leasing issues.

Core-plus deals would also include leverage of 30-60%.

The potential new core allocation is likely to be invested with Ohio BWC’s eight existing open-ended fund managers.

Ohio BWC, with investment consultant, RVK, will work together on RFP searches if the new allocation is approved.

The pension fund has previously allocated capital to Morgan Stanley’s Prime Property Fund, AEW Core Property Trust, ASB Allegiance Real Estate Fund, Heitman America Real Estate Trust, Invesco Core Real Estate USA, Cornerstone Patriot Fund, UBS Trumbull Property Fund and TIAA-CREF Asset Management Core Property Fund.

These funds would be unavailable for new capital if they exceed 1%, or approximately $200m-225m, of the total plan assets for Ohio.

The Morgan Stanley-managed Prime Property Fund might, therefore, not be awarded new capital.

The fund was initially allocated $200m when it was hired in 2012.

Ohio BWC’s annualised long-term returns, net of fees, are 7% for core, 9% for core-plus and 12% for value-added.

The plan’s $1.4bn real estate portfolio represents 5.6% of its $24.7bn total plan.