State Universities Retirement System of Illinois (Illinois SURS) is to redeem close to $400m (€339m) from UBS’s flagship US real estate fund, and plans to invest in Brookfield Asset Management’s latest global opportunity fund.
According to a board meeting report, the pension fund is redeeming $398m from the UBS Trumbull Property Fund, which had more than $23.6bn in assets under management in March. The units being withdrawn are expected to be worth around $404m by the time the redemption takes place next year.
Illinois SURS said it will reinvest $300m into core-plus real estate strategies and $60m into non-core real estate. The pension fund’s real estate portfolio is under-allocated to value-added and opportunistic investments.
The pension fund expects to invest $35m in Brookfield Strategic Real Estate Partners III, an opportunity fund for which Brookfield is hoping to raise $10bn. Brookfield, which did not comment, raised $9bn for its second opportunity fund in 2016.
Illinois SURS said it will recieve a 10% discount on the fund’s management fee if it commits during the first close. The pension fund said this would create an $52,000 annual saving based on a $35m commitment.
Brookfield Strategic Real Estate Partners III, which is at an early stage in the capital raising process, is expected to invest half of the capital in the US, and half in Europe, Asia and South America, Illinois SURS said.
It will target net and gross internal rate of returns of 16% and 20%, respectively, by investing in real estate assets, companies, distressed debt and securities.