The Orange County Employees Retirement System is moving capital out of foreign REITs and into private real estate funds, according to a board meeting document.

Orange County’s real estate consultant, RVK, said the ex US REIT strategy had produced a tepid performance over the past year, due to the strengthening of the US dollar against major currencies.

The $114.9m (€105.7m) REIT portfolio is managed by BlackRock through the Developed ex US Real Estate Index Fund.

Orange County and RVK are now evaluating international fund opportunities.

Capital could be committed later this year.

The consultant said three unnamed funds were under consideration.

The pension fund is looking at a value-add European fund near the end of its €1bn capital raise, as well as a value-added fund strategy for US apartments.

The former, run by a London-based manager, has a history of investing capital in Germany, the UK, France and Poland.

Targeted returns on the fund, which will invest in office, retail and industrial assets, are 15% net IRR.

Orange County is planning to invest $75m in a value-added fund strategy for US apartments, a sector the fund is significantly underweight.

The fund had a 17.1% exposure to apartments at the end of last year compared with 25.5% for the ODCE benchmark.

Waterton Associates’ Residential Property Venture XII fund is also being considered.

The fund, which targets an overall levered 12-14% net IRR, has roughly 30-40% of the target coming from current cash distributions.

Orange County’s staff and RVK will consider any other apartment funds that target a similar strategy and risk/return profile. 

A final decision is due next month or June.

The investments are part of the up to $225m that will be committed by the investor during this year and 2016.