Orange County Employees Retirement System (OCERS) is considering investing in foreign real estate funds for the first time.

The US pension fund is likely to focus on value-add strategies in markets outside the US, particularly in Europe.

As reported in April, OCERS is moving capital out of global real estate investment trusts (REITs) and into private real estate funds.

OCERS has a separate account with BlackRock for a REITs strategy worth $119m (€106.2m), as of March this year.

RVK, the fund’s real estate consultant, said REITs do not provide a direct proxy for investment in real estate and the daily evaluation of real estate securities introduces an elevated degree of volatility and foreign exchange risk into the real estate portfolio. Over the long-term, RVK recommends a periodic rebalancing out of publicly traded real estate securities into funds.

The consultancy said there were opportunities in value-add strategies outside the US as deleveraging remains slow. According to board meeting documents, the consultancy has pointed to significant levels of debt maturities in the near future, with potential investment opportunities in recapitalised and restructured real estate assets.

The actual time and amount of capital to be invested outside of US is yet to be determined, but could happen later this year or in early 2016.

OCERS has also approved two new commitments to US funds. A new, $75m commitment to Waterton Associates’ $500m Residential Property Venture XII has been made. The manager has made a co-investment of 4% of total capital commitments up to $20m.

A $50m commitment to the True North Real Estate Fund III has also been made, following an initial $50m allocation to the debt fund in January last year.

RVK said part of the rationale for the new commitment was that OCERS had become under-allocated to real estate, partly as a result of the sale of KTR Industrial Fund III to Prologis/Norges Bank Investment Management.

The new commitment to Fund III will take OCERS up to its 10% allocation by the end of 2017.