REAL ESTATE – Orange County Employees Retirement System has approved new capital for real estate searches to invest in global real estate securities and timber assets. It was advised by its consultant, Callan Associates.
At a recent board meeting, Orange County was looking at either a domestic or global REIT strategy. Investment officer Lorelei Chao said: "We chose to invest in a global securities programme because of the expanded opportunity set available in the global REIT market."
The pension fund has allocated that 10% of its real estate portfolio will be invested in a global REIT strategy. This means that the amount available for the search is around $70m (€52.9m).
It has not made a final decision as to what the structure will be for the manager that is hired, which could be either a commingled fund or separate account relationship.
The pension fund’s investment staff and its consultant will present a short list of manager candidates to the OCERS’ Private Markets Committee meeting in April. A decision could be made at that time. The pension fund expects that investing in REITs will produce a return of 8-10%.
Orange County Employees has awarded a targeted allocation for timber investments of 2%. This will give the pension fund a total of $140m to work with. There has been no final determination on if the capital will be invested in a commingled fund or in a separate account. A short list of managers will be brought before the pension fund’s private markets committee meeting next month.
Orange County has been an active investor in timber assets since 1992. The current allocation is a subset to the allocation for real return strategies. Chao said: "The new allocation to timber was based on the asset class providing diversification, benefits, low volatility and cash flow."
The pension fund now has total assets of $7bn, as of the end of 2006, with a 10% targeted allocation for real estate. Orange County has invested 7.93% in the asset classs and its portfolio has a current value of $539m.
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