GLOBAL - The Pennsylvania State Employees Retirement System has decided to change its benchmark for private real estate investment.

It will now be using the NPI All Open-Ended Commingled Fund index instead of the NCREIF Property index.

Pennsylvania State officials said they wanted a benchmark that better reflected the range of private real estate the scheme owns. 

The NPI is composed mostly of core properties with no leverage. Approximately 98% of the index is made up of the four main property types: office, industrial, retail and apartments.

The pension fund has invested in a number of commingled funds that own core properties. It also holds interests in properties that are either considered value-added or opportunistic.

Pension fund officials said the NPI would also be a truer representation of its private real estate portfolio, as it holds core assets, as well as hotels, senior housing and land.

The new benchmark covers 35 of the largest open-ended commingled funds in the market. There are also some core commingled funds and others that are focused on a single property type like industrial are considered to be value-added.

The index covers more than 2,600 properties, with combined assets worth more than $103bn (€73.9bn).

Pennsylvania State holds a real estate portfolio valued at $2.1bn through the end of June 2010.

The fund has invested 8.8% of its $24.2bn of total plan assets in real estate, with the targeted allocation set at 9%.

Pennsylvania State officials said the fund had so far had a very quiet year with respect to real estate and that they were waiting for the economic collapse to workout itself out.

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