The San Diego City Employees’ Retirement System is planning to exit REITs.

The US pension fund, according to a board meeting document, will discuss the plan at an investment committee meeting on 12 May.

Brookfield Asset Management manages the portfolio.

Aon Hewett, the investment consultant for San Diego City, wrote in a board meeting document that real estate securities suffer from higher volatility, made worse more recently by factors beyond underlying real estate fundamentals.

It added that, while the pension fund’s public real estate portfolio has performed well over the long term, the current private real estate portfolio has a broad mix of strategies that provide many of the benefits of real estate securities but with lower volatility.

San Diego City has had public REITs in its portfolio since 1997, having targeted the sector as a means of further diversifying, enhancing long-term returns and providing liquidity.

At $79.4m (€69.7m), the strategy represents 11.4% of its total real estate portfolio, or 1.2% of the total plan. 

San Diego City also has exposure to real estate securities in its equity portfolio.

Representing $93.8m, this is around 3% of the public equity portfolio, or 1.4% of the pension fund’s total plan assets.

The pension fund is considering a $20m commitment to LaSalle Investment’s Asia Opportunity Fund V.

The main investment focus is Japan and Australia, as well as Chinese logistics where opportunities are still available.

The fund has an 18% net IRR target, and the portfolio leverage is projected to be 65%.

The fund will acquire assets in need of repositioning, development or redevelopment and active asset management to create core properties to sell in the institutional market.