UNITED STATES - Pennsylvania Public School Employees Retirement System has allocated $286m (€210m) in two commingled funds to target high returns in European mortgages and Asia.
The pension fund believes it will achieve higher returns and more diversification within its overall investment portfolio by taking a higher risk.
One of those commitments is up to €100m into the Apollo European Principle Finance Fund which has been created to acquire non-performing commercial and residential mortgages in European countries such as Germany, the United Kingdom, Portugal and Spain.
The amount to be invested by the pension fund must not exceed more than 90.9% of the commingled fund's committed capital and Apollo is looking to have a total equity raise for the fund of €1.5bn so the fund manager and its affiliates are planning to put €300m of its own capital into the fund as a co-investment.
Pennsylvania Public School will put this commitment into the private debt component of its investment portfolio.
The pension fund has also approved a commitment of up to $150m in Carlyle Group's Asia Real Estate Partners II and hopes to receive gross IRR in the range of 20-30% for its investment
Pennsylvania has stated the allocation cannot amount to more than 25% of the total committed capital in the opportunity fund.
Assets acquired for the fund will be invested in the main property types and could be used to purchase both single assets and portfolio transactions.
Pennsylvania Public School made the commitment as part of its opportunistic real estate strategy and the action was taken at its 26 September board meeting.