Ohio Bureau of Workers Compensation (BWC) State Insurance Fund has ruled out investing in value-add real estate funds that include retail property, in a bid to limit its exposure to the troubled sector.

Earlier this year, Ohio BWC said it planned to commit $150m (€136m) to value-add funds this year, but a board meeting document shows the pension fund is concerned about the effects of falling retail property values, which are showing up in its core real estate fund investments.

The board normally discusses second-quarter results at its November meeting, but real estate consultant RVK brought forward a presentation on its core real estate investments so they could be discussed at the September meeting.

The document shows that almost every core real estate fund in which Ohio BWC has a stake generated negative capital appreciation for its retail properties during the second quarter of 2019.

For example, the retail assets owned by the $14.5bn UBS Trumbull Property Fund produced a capital-appreciation return of minus 19.4%.

Ohio BWC said the UBS fund is over-allocated to the sector with 23.39% of its portfolio consisting of retail properties, above the 18.3% weighting in the NCREIF ODCE Index.

Other core and core-plus real estate funds that are over-allocated include the $6.6bn AEW Core Property Trust, which has a 22.2% exposure to retail, and the $6bn ASB Allegiance Real Estate Fund, which has a 25.9% exposure.

Ohio BWC has estimated that its total market-value exposure to large retail malls is approximately $200m.