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.