UNITED STATES - San Diego City Employees' Retirement System is planning to take advantage of tactical investment opportunities in the second half of this year in certain property types.

Pension fund officials say the hotels, office buildings and retail properties markets, which are being significantly affected by the economy, could present interesting deals, though the fund is no rush to invest immediately as a lack of equity and debt in the marketplace means the value of existing assets is still dropping.

San Diego City has already made a $20m (€14.8m) commitment to the Cornerstone Hotel Income & Equity commingled Fund II but Cornerstone Real Estate Advisers is now waiting for the hotel market and pricing of assets to stabilise before making any additional acquisitions, so the pension fund is looking at balancing its commitment to the hotel fund with allocations elsewhere.

The pension fund is understood to want to avoid making commitments to commingled funds with pre-specified assets as such portfolios will reflect the highly-priced assets of 2007 and 2008. 

San Diego City is also looking at signing some new debt strategies in at the end of this year and into 2010 as there is nothing at this time to suggest traditional lenders will be back in the market before then.

At the same time, the pension fund is also planning a complete review of the separate account portfolio managed by Invesco Real Estate.

Invesco has underperformed its return target of the NCREIF Property Index + 25bps over one- and three-years, and this has kept it in the bottom quartile of Townsend Group's Core Universe for separate accounts.

The value of the separate account portfolio - holding six properties - is now $66.6m but the pension fund projects this will fall to $58.3m by the end of 2010.

Its combined real estate portfolio had assets valued at $477m at the end of Q3 2008, amounting to 11.1% of the pension fund's total assets.

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