UNITED STATES - San Bernardino County Employees' Retirement Association has expanded its real estate investment program to the Asian markets for the first time by investing $40m (€28.9m) in two commingled funds but is now turning attention to the structured finance sector.
The pension fund has placed $20m each into AIG Asia Real Estate Partners II Fund and LaSalle Asia Opportunity Fund III, however, this now fulfils the San Bernardino County's Asian real estate asset allocation.
San Bernardino County's investment officer Brian Long said, "The main factors are that these commingled funds give us an opportunity to produce higher returns and invest in a new emerging market. We think that both of the managers have a lot of people focused on investing in Asia as AIG, for example, has 150 working professionals focused on the Asia markets."
Both of the commingled funds will be investing a good portion of their capital in Japan, and Long notes this is a market "we believe in for the future".
Net IRR for LaSalle's fund is 17-18% while AIG is seeking 18-20%.
At the same time, the pension fund decided at its earlier September board meetings to expand its structured finance investments by committing $20m each to the Guggenheim structured real estate fund III and Square Mile Partners LP.
Long thinks now is a good time to be investing in structured finance and the structure of the Guggenheim fund, in particular, offers less risk.
"This is an area where we might be placing more capital. We will be limited as we are over our 8% targeted real estate allocation by 2%," said Long.
"But there is a strong opportunity in marketplace given the dislocation happening in the credit markets. And the [Guggenheim] commingled fund, for the most part, will be in the second position in the capital structure for most of its deals and will not be affected first if anything should go wrong," he added.