UNITED STATES - San Bernardino County Employees Retirement Association is planning to invest a total of €60m (€41m) the Apollo European Principle Finance Fund, although at least $20m of those assets are being as co-investments to specific transactions.

"We think there is a strong investment opportunity on debt transactions involving existing residential properties," said Don Pierce, an investment officer for the pension fund. "This segment of the real estate market has seen significant levels of distress."

The commingled fund will set distressed debt as its focus and the primary target will be to investi in debt that is backed by properties located in Germany and the UK.

Apollo is still in the very early stages of capital raising on its European Finance Fund, however officials hope to raised an unleveraged $1.2bn.

The commingled fund manager will also making a "sizeable" co-investment into the commingled fund worth in the region of 20-30% of the total capital raised for the fund.

Investors are hoping to achieve an unleveraged IRR of 20%, based on a three-year investment period and a six-year life for the commingled fund.

This investment by San Bernardino County is actually allocated to its private equity asset class, which has a 16% targeted allocation for private equity and so far has 16.6% invested in the asset class.

That said, the pension fund is still investing some capital in real estate commingled funds with a debt strategy. The most recent example of this was a $30m commitment recently approved to the Invesco High Yield Debt fund II.

Its investing strategy, once it raises the targeted $200m, is to buy existing debt already placed on commercial real estate assets, to generate a 13-15% IRR over a five-year period.