UNITED STATES - Oregon Public Employees Retirement Fund has approved an investment worth $700m (€477.7m) into three real estate commingled funds.

The pension fund decided at its January 31 board meeting.  It was assisted in these moves by input from its consultant, Pension Consulting Alliance.

Most interesting of these moves is a $100m commitment into Lone Star Real Estate Fund I as this is a commingled fund which will for the first time see Lone Star create a real estate-only fund focus solely on investment opportunities in the United States.

All of its previous investment funds had merely included real estate in them and carried more of a global strategy but Lone Star has changed its strategy with this new launch - expected to pull in $1.5bn in assets - as officials believe there are going to be a lot of strong real estate plays in the US opportunistic sector over the next two years, as a result of changes in the debt market.

Oregon PERF has opted to place some of its assets in this new fund based on the historical performance of Lone Star, said Brad Child, senior investment officer for real estate for the pension fund.

"We have invested with them dating back to their first opportunity fund. They have a strong history like dealing with the Resolution Trust Corporation assets from the late 1980s to mid 1990s."

Oregon PERF is projected to achieve a 25% gross and 18% net IRR for its investment on real estate fund I through a variety of transactions in distressed debt, underperforming existing assets and development and redevelopment properties.

Oregon PERF has also made a $500m commitment to Lone Star fund VI - a $5bn global fund with anticipated return of 25% gross and 19% net and which has at least 25% of the deals in real estate-related investments, and in markets such as US, Japan and Germany.

The remaining $100m allocation was to KTR industrial fund II.

Topics