REAL ESTATE - The School Employees Retirement System of Ohio has approved its annual real estate investment plan for fiscal 2007 at its board meeting in late June.
One of its new investment strategies for the next 12 months will be to consider investing in value-added or opportunistic real estate commingled funds. The pension fund believes this is a good way to achieve diversification within its real estate portfolio. The managers of these funds typically invest through strategies or markets that many pension funds haven’t targeted in the past.
Ohio School Employees has not established a specific allocation that will be invested in this strategy. The pension fund feels that it could potentially invest around $100m-$150m in this kind of real estate.
Ohio School Employees will be doing some research in fiscal 2007 about possibly placing some capital into a global REIT strategy. The pension fund already has a domestic REIT program.
It thinks that a global REIT mandate would give the pension fund an additional layer of diversification and higher returns. This strategy will give the institutional investor exposure to new companies and economies. In some cases, returns on foreign REITs can deliver a 100 basis point difference. The pension fund has not come up with a specific amount that will be invested in this strategy.
Ohio School Employees is going to explore the possibility of increasing its international real estate exposure. The pension fund has a 15% allocation now for international. This could be spiked up to 20%. The reasons for this action are for more diversification and the potential of higher returns on foreign investments.
The pension fund will be looking at maybe adding some new real estate managers that it works with over the next 12 months. This would be done to gain access to different property types or strategies.
The fund had this same kind of strategy in fiscal year 2006 - it ended up in selecting only one new manager: Fillmore Capital Partners. The scheme invested $30m into the real estate manager’s commingled fund, Fillmore East Fund, L.P.