The San Francisco Employees’ Retirement System is investing in European real estate for the first time.
The US pension fund approved a €100m commitment into NIAM’s Nordic VI fund, an opportunity fund with a focus on commercial and residential real estate.
In a board meeting document, SFERS said the Nordic region had proven to be highly resilient despite persistent sluggish growth from major European economies.
The Nordic economies are expected to grow 1.6% this year.
According to a report from Newsec, the figure compares favourably with the euro-zone, where economies are predicted to grow 1% this year.
The Nordic VI fund will invest in Denmark, Finland, Norway and Sweden, targeting income and capital growth.
The fund is targeting a €500m capital raise, with a hard cap of €800m.
SFERS expects that all of its $100m allocation will be accepted by NIAM.
The pension fund said in a board meeting document that, based on the manager’s estimates, the fund is expected to be oversubscribed, with existing and new investors’ interest in excess of €1bn.
NIAM has only provided allocation consideration to a few investors, including SFERS for the 22 May first close.
Investors making a commitment after that date could face more severe allocation cutbacks.
Targeted returns are an 18-20% gross or 13-15% net IRR.
NIAM will co-invest 1% of commitments, up to €5m.
The pension fund believes NIAM has a proven track record in the Nordic region over multiple market cycles.
It stated in a board-meeting document that, since 2006, the manager has delivered a combined marked-to-market 14% net IRR by the end of last year.