US - The Jacksonville Police and Fire pension fund plans to double its real estate allocation once it gets the all-clear from the state legislator.
The $850m (€646m) pension fund wants to increase its real estate allocation from 10% to 20% in order to take advantage of the drop in values, expand its investment options and reduce portfolio risk.
John Keane, executive director of Jacksonville Police and Fire Pension Fund, said: "With the economic conditions there is a significant amount of distressed real estate inventory that is very valuable and is available at a fraction of its normal price.
"The pension fund, as a long-term investor, is a suitable investor in these distressed situations because we can buy and hold them," he added.
A bill allowing the pension fund to increase its real estate allocation 20% passed through the State House's Economic Development and Community Affairs last week, and is currently being discussed by its Finance and Tax Council.
The legislation being discussed would lift certain restrictions on the pension fund's investment strategy and could eventually allow the pension fund to branch out into new asset classes such as hedge funds.
The pension fund's national real estate portfolio is currently worth $95m and returned -3.24% last year but its local property portfolio, which makes up around 5% of the total real estate portfolio, proved more resilient, returning around 12%.
The pension fund is currently considering investing in real estate outside the United States.
"There are a lot of attractive real estate opportunities outside the US and it is certainly something that we are considering and will be speaking to our advisers about," said Keane.
The proposed Bill has had two hearings and is due to have its third tomorrow (Tuesday 31 March). If enacted, the law will take effect on 1 July 2009 and the pension fund will review its real estate strategy and immediately increase its allocation to real estate to 15-18%.
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