Orange County Employees Retirement System is conducting a new manager search for $150m (€117.7m) of non-core investment.
The pension fund’s real estate consultant, RVK, said the new mandate would need to consider Orange County’s desire to change the make-up of its real estate portfolio gradually.
The amount of capital to be invested during the current fiscal year to keep real estate as a 10% component of the overall pension fund is also a factor.
As of June of this year, real estate assets held by the pension fund were weighted at 67% core, 23.7% non-core and 9.3% international public REITs.
Orange County wants the portfolio to become 60% core, 30% none-core and 10% REITs by the end of 2016.
Orange County and RVK will conduct due diligence on investing some capital in the AG Core Plus IV fund.
An investment recommendation is expected next month, along with a presentation to the pension fund’s investment committee.
Orange County made a $40m commitment to AG Core Plus III in 2011, and the fund has generated a gross IRR of 18.94% since inception.
The $22.7m of capital called and invested is currently valued at $29.5m, as of the end of June.
For Fund IV, Angelo Gordon & Co is targeting 14-15% gross returns, with most investments to be in the US, alongside selective transactions in Europe.
Orange County and RVK will also consider other diversified funds targeting a similar risk/return profile to that of AG Core Plus IV.
The manager needs to have at least $500m in combined US and international real estate assets under management.
Orange County does not want more than 20% ownership of the total fund.
Each manager must have at least five years of performance history managing commercial real estate.
Orange County is looking for a focus on core-plus and value-added assets, with the opportunity to increase value through leasing, redevelopment, repositioning and other activities.
Preferred property types include apartments, hotel, industrial, office, retail and self-storage assets.
