UNITED STATES - Pennsylvania Public School Employees' Retirement System has approved $925m (€598.8m) into new real estate investments through a variety of non-core commingled funds.

The largest of these commitments was an allocation worth up to $400m to the Morgan Stanley Real Estate VII Global fund -a $10bn opportunity commingled fund being raised by Morgan Stanley Real Estate - set to the become the largest real estate commingled fund created so far.

The Morgan Stanley fund invests in distressed opportunities, developments in emerging and developed markets - such as central Europe, the United States, China, India, Hong Kong, Mexico, Brazil and Russia - as well as corporate and government divestitures, ranging in initial value from $20m to over $100m.

Pennsylvania made its move - with the assistance of its real estate consultant Courtland Partners - after seeing the past success of its earlier funds, and this latest venture is projected to produce an aggregate gross IRR of 33% and a 2.4x multiple on equity.

At the same time, the pension fund has committed up to $100m to the AvalonBay Communities' Value Added fund II, although this sum is not allowed to be more that 25% of the total capital in the $500m fund focused on investing in US apartments.

The pension fund thinks apartments still represent a good investment opportunity as many of the apartment markets are showing strong demand and have constrained future supply.

Avalon's value-enhancement strategy is to acquire, redevelop and place new management in high barrier-to-entry market properties on the East and West Coasts and in Chicago.

The commingled fund will have exclusive access to AvalonBay's investment pipeline, a $12.5bn public REIT.

Pennsylvania Public School has also approved three other real estate investments:

$150m to Paladin Realty Latin America Investors III $175m to RCG Longview Debt Fund IV, and $100m to Strategic Partners Value Enhancement Fund II.