UNITED STATES – Pension funds are continuing to invest in real estate but may not follow their original allocation strategies in stable markets, suggest figures related to one US pension fund.
New Jersey Division of Investment has now yielded an gross internal rate of return (IRR) of 45% for the pension fund since beginning its $2.2bn (€1.6bn) investment in real estate in 2005.
Having started its real estate program in December of 2005, the fund has now made commitments to a total of 27 commingled funds, having set out to reach a total fund allocation of 4% in real estate.
Its long-term plan was to have the investment split with 60% core and 40% tactical but this changed for the first two years of the program when returns for core investments were low.
As a result, its actual allocations were revealed to be 38% of the funds in core real estate and 62% in tactical investments, the latter of which included 20% in global real estate, as the pension fund chose to be over-allocated to tactical and then readjust to its long-term target when the market for core changes.
This investment plan was reflected in the recent July 19 board meeting where the pension fund looked at a variety of non-core and international real estate commingled funds for possible investment of up to $400m.
Six investments were considered with a potential total invest of $400m.