UNITED STATES - The Pension Benefit Guaranty Corporation (PBGC) is looking at investing in real estate for the first time and is therefore seeking strategic partnerships so it may allocate up to $2.5bn (€1.6bn) in the sector.
A statement issued by the body confirms the fund is issuing a request for proposals (RFP) to find two or three firms with whom it can create strategic investment partnerships, as decided earlier this year.
This new policy will see 10% of its asset allocation applied to real estate and private equity, though a spokesman for the fund said a definite allocation figure will only be made once partners are appointed and further discussion have taken place.
The fund's board of directors announced in February it is currently facing a $14bn shortfall on its obligation and warned it "faces the possibility that someday it will run out of money" so was intending to alter its asset allocation.
At that time, the fund said "to take advantage of the PBGC's long-term investment horizon" the fund would allocate 45% of its assets to equities, 45% to fixed income and 10% to alternatives as it was found this strategy "yielded better results than the old investment policy 98% of the time over rolling 20-year periods - though there was no mention of real estate within that allocation then.
Chicago-based EnnisKrupp + Associates has been hired to assist the development of the RFP and evaluate proposals, and was selected in part because it already assists the Teacher Retirement System of Texas.
Companies interested in submitting a proposal must have global operations and have managed at least $1bn through strategic relationships within the last three years, accordin go the PBGC.
Full details of the services required and instructions for submitting proposals are also published on the US government's FedBizOps (FBO) procurement website www.fbo.gov.
The PBGC was created in 1974 and is the forerunner to the UK's Pension Protection Fund (PPF), and acts as a lifeboat vehicle to pension fund members whose schemes have been wound up as a result of an employer's bankruptcy.
It is therefore increasingly likely to be run in the same way as a pension fund over time, much like the PPF, to reduce risk to the fund and meet liabilities.
The scheme currently guarantees the basic pension benefits of approximately 44 million US plan members in over 30,000 private-sector defined benefit schemes, and is financed through "insurance premiums" paid by sponsors of these plans as well as investment returns on the fund.