Ohio Bureau of Workers pension fund makes first foray into real estate

NORTH AMERICA - The Ohio Bureau of Workers Compensation has hired eight core open-ended fund managers as part of its first foray into real estate.

Capital will be invested into the Prime Property Fund managed by Morgan Stanley; the AEW Core Property Trust; the ASB Allegiance Real Estate Fund; Heitman America Real Estate Trust; Invesco Core Real Estate USA; the Cornerstone Patriot Fund; the TIAA-CREF Asset Management Core Property Fund; and the UBS Trumbull Property Fund.

The total amount of capital to be divided among the managers is $950m (€736m). 

The scheme has not yet determined how much capital will be allocated to each fund.

This will likely occur next month, when contracts will be signed with all of the managers. 

Steve Buehrer, administrator and chief executive at Ohio BWC, said: "These managers will assist BWC in joining other institutional investors in large funds that own portfolios of high-quality commercial real estate. 

"Our investment staff and consultants have once again taken great care in developing and employing an investment strategy that will support a strong workers' compensation system."

Bruce Dunn, CIO at Ohio BWC, said: "This move into real estate will diversify our portfolio and mitigate some of the risk associated with BWC's heavy investment in the bond market, which is sensitive to changing interest rates."

Ohio BWC has a return goal for core real estate to meet or exceed the NFI-ODCE benchmark. 

The investor defines core real estate as high-quality, institutional-grade commercial real estate where most of the investment return is expected to come from income earned rather than appreciation in value.

The capital allocated to the core open-ended fund managers is part of a 6% targeted allocation to real estate established last year. 

At that time, Ohio BWC determined that 4.5% of the allocation would be for core and 1.5% for value-added. 

This would mean $950m into the former and $150m into the latter.

The pension fund had total plan assets of nearly $24bn as of 31 August.