Ohio School Employees approves annual real estate

UNITED STATES - School Employees Retirement System of Ohio has approved a new annual plan to invest around $100-$150m (€73.4m-€110m) in real estate for fiscal year 2008.

The pension fund is expected to keep its targeted real estate allocation at around 10%, but plans to split its assets into two, investing the first $50m-$75m in commingled funds with international real estate exposure, preferably in one or two pan-American funds.

Remaining capital is expected to be placed by Ohio School Employees in either value-added or opportunistic commingled funds, and perhaps with managers it had a previous exposure with such as CB Richard Ellis Investors, Beacon Capital Partners and Colony Capital.

Consultancy Summit Strategies Group will support the pension fund in its commingled fund manager search.

Ohio’s move is fairly typical of the activity of many pension funds around the United States which are increasingly moving away from investing additional capital into core properties and separate accounts because it is felt there is already too much capital earmarked for core properties. This is said to have kept returns on these assets at historically low levels and with little indication this will be changing anytime soon.

Likewise, very little capital is being set aside for separate account activity as many pension funds are having a hard time finding new solo assets to buy.

As a result, Ohio is now turning its attention to global REITs over the next 12 months, having considered it as a possible strategy for fiscal 2007 but eventually decided no allocation would be made to the strategy.

There is a possibility that this could happen again this year, according to sources, but the pension fund is said to believe global REITs are a good way to achieve an additional layer of portfolio diversification.