The Oregon Public Employees Retirement Fund is looking to boost its exposure to core real estate by 20%.
The US pension fund is also looking to lower its allocation to REITs and opportunistic real estate by 10%, according to a board meeting document.
The investor has been working on a revised vision for its real estate portfolio for several months with its consultant, PCA.
Oregon PERF shifted its strategy, in which current income becomes a larger and more dependable share of the real estate portfolio’s total return, on PCA’s recommendation.
The shift was driven largely by a renewed emphasis on real estate’s fundamental risk/return attributes.
Oregon PERF wants its allocation to the real estate asset class to be more diversified.
The plan calls for core real estate to become 60% of the fund’s portfolio.
At the same time, public REITs will drop from 20% to 10% and opportunistic from 30% to 20%.
Oregon PERF also wants to grow its core, open-ended funds portfolio.
At present, the pension fund is only invested with RREEF, having backed its America II vehicle.
It is also looking for scalable core/core-plus separate account partnerships to complement its closed-end fund investments.
Most of Oregon PERF’s potential new capital for core real estate would be invested in a separate account structure.
The reduction in capital from REITs will affect Oregon PERF’s relationships, with one or two managers kept in the future.
LaSalle Investment, Cohen & Steers, Woodbourne, Morgan Stanley and EII manage the portfolio, valued at $1.85bn.
The plan to reduce exposure to opportunistic real estate will see the majority of existing funds Oregon PERF has invested in sold over the next five to seven years.
The pension fund also hopes to improve the real estate portfolio’s inflation-hedging potential with a greater emphasis on current income generation.
Oregon PERF staff and PCA are planning to formalise the strategy shift, with the revisions for approval to be presented in February next year.