Oregon Public Employees Retirement Fund (PERF) has removed Morgan Stanley and European Investors from the roster of managers in its $2bn (€1.7bn) REIT portfolio as part of an exercise designed to shrink the pension fund’s overall allocation to the asset class.
The investor said the decision to fire the two managers was not performance related, but would allow the pension fund to achieve the new target range for its allocation to REITs approved last year, of 0-10%.
REITs had previously made up 15-25% of its target asset allocation.
Along with the elimination of the two managers from the REITs list, Oregon PERF is also creating a new mandate for the portfolio managed by LaSalle Investment Management, investing in REITs that own US niche real estate.
Austin Carmichael, investment officer for real estate, said: “We want the LaSalle REIT portfolio to be a diversifier to our private real estate portfolio that invests in traditional property types through separate accounts and core open-ended commingled funds.”
The niche property types could include a combination of senior housing, self-storage, medical office buildings and student housing – property types the pension fund said were more difficult to access via private structures.
The proposed mandate and benchmark for the LaSalle REIT would comprise a 54-security universe with a market capitalisation of approximately $351bn, the pension fund said in a board meeting document. It said it would be creating its own in-house benchmark for the portfolio in the near future.
The mandate change will shrink the REIT portfolio that LaSalle manages significantly, from its fair market value of $1bn at the end of the first quarter of 2017 to 2% of the pension fund’s total plan assets or around $180m.
The portfolios managed by Morgan Stanley and EI had an ex-US strategy, with fair market values of $442.7m and $82.3m respectively, as of the end of March 2017.
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