UNITED STATES - Less new pensions capital is likely to be invested in real estate over the coming months as many US pension funds are now approaching their real estate allocations.
Most pension funds are not in a position to change the allocation anytime soon as they only look at increasing their targeted real estate allocations once every several years and many of these investors have already done so recently.
Ohio Police & Fire Pension Fund is one of those funds approaching its real estate allocation, as it has 8% targeted allocation but has now invested 7.1% of its total assets in real estate.
It will be even closer to its allocation once it commits to a further three commingled funds - $25m (€18.3m) to Colony Investors VIII, $25m to Westbrook Fund VII and $20m to Blackstone Real Estate Partners VI.
Likewise, Pennsylvania State Employees Retirement System is now in the same boat as the $33bn pension fund has an 8% targeted allocation for real estate, but around 7.8% invested in the asset class.
Its future investing in real estate will therefore be limited to reallocating capital with commingled fund managers it has already invested with.
Massachusetts Pension Reserves Investment Management Board is also acting along the same lines and the pension fund will be very close to its 10% targeted allocation once it funds its global REIT manager search.
The pension fund has invested 9.2% to 9.3% in real estate to build a portfolio valued at $800m-$900m but has also approved $200m to its global REITs strategy.
That said, officials in the pension fund real estate industry believe the slowdown in new pensions capital will not impact pricing as there is still substantial capital coming from other institutional sources.