UNITED STATES - Sacramento County Employees Retirement System is now in the process of looking at firms to manage an ex-US public REITs strategy, but has rejected plans from one of its managers to change a fund's existing strategy.
There is a good chance that a final decision on the REIT manager selection could be made at the pension fund's board meeting in September, according to Jeff States, chief investment officer of the pension fund.
"At [the 21 August] meeting we did get some information on four potential candidates for the search," said States.
"It was the decision of the board that we need to get more information on these firms and that we are also thinking about maybe bringing in additional firms to expand the search."
At this stage, Sacramento County has allocated 1% of its total plan assets for the REIT manager search, which amounts to around $60m (€411m) to be invested in this strategy.
The pension fund is particularly interested in a REIT strategy as it would allow capital to be invested in the market quickly and give a daily valuation of your portfolio.
At the same time, the board also rejected proposals at its August for investing in debt, as opposed to just equity investments, through the Hines US Office Value Added Fund II.
Hines asked the board to allow debt investments in office buildings to be made for the fund but States said Sacramento County voted not to allow the change it strategy.
"It was the board's decision that the commingled fund was created to have an equity strategy and we would prefer to keep it that way."
The pension does realise if there are enough investors in the commingled fund to vote for the change then this could happen but Sacramento County would likely stay in the fund if this were to happen.
"It would be very difficult for us to get out of the fund because of the way it is setup. Liquidity is not a feature of the fund at this time. Selling would also not make sense now, given the status of current real estate markets," he added.
Sacramento County has made a $25m allocation to the US Office Value-Added Fund II. Around $10m of the capital has been called by the manager at this point. Total assets in the commingled fund are valued at around $1bn.
The pension fund's consultant, Mercer Investment Consulting, prepared the manager search data through principal Allison Yager.