UNITED STATES - Pennsylvania Public School Employees' Retirement System has increased its exposure to European real estate by committing a total of €200m to two commingled funds.
Each of the commingled funds will receive a €100m commitment, following a decision taken at the September 27 board meeting, as the pension fund anticipates the EU countries, along with Russia, Turkey and the Ukraine, will outperform the United States in terms of GDP growth.
Consensus forecasts for average annual GDP growth of EU countries are 3.1% from 2007-2010 versus 3% for the United States over the same period.
One of the commingled funds assets will flow into is Apollo Europe real estate III opportunity fund, which is expected to pay Pennsylvania Public Schools compound annual IRR of 16-20%, assuming a two to seven-year holding period.
All of the main property types will be targeted and Apollo hopes to add value through aggressive asset management of selective properties with proven local joint venture partners.
The remaining allocation will be placed with Macquarie Global Property's Europe III fund, which buys individual properties, portfolios and makes investments in real estate operating companies.
Pennsylvania Public School expects to receive an IRR over time of 17-20%.