UNITED STATES - San Francisco City and County Employees Retirement System took another hit on its real estate portfolio in the first half of 2009, as the falling market continued to hurt investment returns and income.

The value of the SanFran City & County real estate portfolio dropped to $1.275bn (€871m) by the end of June 2009, falling another $188m from the $1.46bn the portfolio was worth at the end of 2008 and even lower again from the $1.92bn held in June 2008.

These losses are typical of the valuations felt by many US pension funds, as institutional investors continued to suffer at the beginning of this year. However, some funds are predicting that the US will see returns level off by the middle of next year.

The portfolios suffering the biggest losses were a separate account managed by RREEF and an industrial commingled fund managed by AMB Property Corp.

RREEF runs a core separate account portfolio investing in US leased offices, industrial and retail space and residential property, but this has fallen by $246m or 32% and the assets are now valued at $538.2m.

San Francisco City and County's investment in AMB Institutional Alliance Fund III also suffered a 45% loss in the first half of this year, dropping by $189m to $242m, after investing in US industrial properties.

The pension fund now has invested 10.8% of its $11.84bn in assets held in real estate, which is still below its 12% targeted allocation for real estate and within its 9-15% range.

San Francisco City and County could still invest further before the end of June 2010, as part of its fiscal year 2010 investment plan.

There is an option to invest an additional $50m into global REITs but the pension fund's investment staff will monitor this sector for now and allocate the capital sometime in the future, with the hope of later investing through its two existing REIT managers: European Investors and ING Clarion Real Estate Securities.

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