The San Diego City Employees’ Retirement System is looking to liquidate its $358m (€321m) separate account managed by Deutsche Asset Management.
The pension fund is working with its investment consultant, Aon Hewitt, on the plan, according to a pension fund board meeting document.
The planned move by the pension fund will have a significant effect, as the separate account current makes up around 50% of the total real estate portfolio held by the pension fund.
Proceeds from the liquidation could be moved into larger, more diversified core funds.
Aon Hewitt wrote in a board meeting document that, given the complex nature of unwinding the separate account, a liquidation plan will take time to develop.
A final liquidation recommendation will be presented to the pension fund’s investment committee in a subsequent meeting.
This, said Aon Hewitt, would result in a more benchmark-aware core real estate portfolio, with exposure to larger assets eliminating the separate account concentration risk and potential for higher portfolio volatility.
Larger core commitments would allow the pension fund to access fee breaks in the funds.
There are now 20 properties in the separate account with Deutsche Management, all in the US.
Eight industrial properties, six office buildings, three apartments and three retail assets make up the portfolio.
San Diego City is in the process of making a $30m commitment to a core open-ended fund, the Morgan Stanley Prime Property Fund.
The planned commitment will not be called by the manager for some time.
Through March, the fund had an entry queue of $1.5bn.
The expectation is that the new commitment will not be accepted into the fund for 2-4 quarters.
The Prime Property Fund has $19.8bn of gross assets with 341 properties.
The fund has achieved a 14.7% one-year total return, beating the NFI-ODCE index by 100 basis points.