UNITED STATES - San Diego City Employees Retirement System has approved its first ever targeted allocation for non-United States real estate investments.
The fund is investing up to 40%, or approximately $220m (€155m), of its real estate portfolio in this strategy, according to Dawn Clarke is assistant chief investment officer for the pension fund.
"It's our opinion that by investing in foreign real estate we will have the opportunity to achieve higher risk-adjusted returns and get an additional level of diversification," said Clarke.
"We will be placing the capital in the marketplace through either commingled funds or a Reit strategy but the amount for either structure has not been determined at this point," she added.
San Diego City already has a US public Reit program with RREEF - the current value of which is $196m.
It is possible the pension fund will use them for a REIT strategy outside of the US or hire a new manager, with the aid of its real estate consultant, The Townsend Group.
The pension fund has already made two commingled fund investments through a $30m commitment to the Colony Investors VIII fund some months ago, along with a further approval at its September board meeting of $20m to AIG Asia real estate partners II opportunity fund, which has a total equity target of $500m.
"The manager already has a solid investment team established in the Asian markets," said Clarke.
AIG's fund has a projected net IRR return of at least 20% by investing in the four main property types - office, industrial, retail and apartments.
It is expected investments will be made in property throughout Japan, China, Hong Kong, Singapore and South Korea.