NORTH AMERICA – The San Diego City Employees' Retirement System is looking into the possibility of changing its real estate manager roster after its 19-20 September board meeting.
According to a board-meeting document, the pension fund and its real estate consultant, Hewitt EnnisKnupp, will recommend terminating its separate account with Invesco Real Estate, transfering the Invesco assets to Deutsche Asset & Wealth Management and replacing Deutsche with EII Capital Management as its global REIT manager.
The pension fund had three concerns for the Invesco separate account.
It said the real estate manager had experienced "very limited success" investing the remaining capital for San Diego City.
The pension fund awarded the manager a new $75m (€47m) allocation in 2010. Since then, only $7.5m has been invested in a single transaction.
The pension fund also said the "focus" for the manager appeared to be "waning".
It said the San Diego City separate account might no longer be a high enough priority, given that Invesco has been successful in raising competing core mandates.
There is also concern that there are a number of assets in the separate account that are held significantly below the initial cost.
The six-property Invesco portfolio had a gross asset value of $124m, as of the end of June.
The core account invests in office, industrial, retail and apartments in the US.
According to a pension-fund document, Hewitt EnnisKnupp and San Diego City believe it would be best to move the portfolio to Deutsche Asset & Wealth Management.
They also said that moving the Invesco account to Deutsche would lead to the need to transfer the global REIT portfolio currently managed by Deutsche.
The Invesco account to Deutsche will create a higher manager concentration than currently is allowed by San Diego City's investment policy.
The global REITs portfolio managed by Deutsche has a net asset value of $72.2m, as of the end of June.
San Diego City, at the same board meeting, will be discussing and recommending its fiscal year 2014 investment plan for real estate. The amount targeted for new commitments is $70m.
Max Swango, managing director for Invesco Real Estate, said: "We fully support San Diego's decision to consolidate their separate account assets.
"We have enjoyed a wonderful relationship with consistent outperformance for San Diego.
"It makes a lot of sense to consolidate, creating a larger portfolio, which will broaden the system's opportunity set in the investment market by increasing their target investment size.
"They remain an important commingled fund client of ours, and we hope to continue that relationship for many years."