UNITED STATES - San Francisco City & County Employees' Retirement System has decided to increase its exposure to real estate to 12%.
David Kushner, deputy director of investments at the pension fund, said officials decided to increase the allocation by two percentage points, on the back of an asset liability and allocation study by its consultants Angeles Investment Advisors.
"Three years ago was the last time that we had an asset allocation review," said Kushner.
"At that time, we had made the decision the drop the allocation to real estate by 2% because of a lack of investment opportunities. But the market has now changed and we think there are some interesting real estate investments that we can be part of."
The pension fund made its initial decision at its June 10 board meeting, so it is anticipated further moves will be made at its September meeting to decide how this new capital - likely amounting to at least $300m (€193.5m) - will be allocated within the real estate portfolio.
Alongside the new real estate allocation, the fund is increasing its international equity allocation from 20% to 23% while alternative investments will rise from 12% to 14%. Its fixed income allocation will therefore be reduced from 30% to 25% to accommodation along with a drop in US equities from 28% to 26%.
San Francisco City and County also approve a real estate commitment at the same board meeting - a $40m investment to the Five Arrows Realty Securities V commingled fund so Rothschild will be making a $15m co-investment to the fund on a pari passu basis, from the manager and Rothschild affiliate employees.
The fund is now approaching a total raising of $850m, having secured a $10m endowment allocation from Texas Christian University.
The fund carries no leverage yet investors are projected to see net IRR of 12-15%.
The fund's strategy is to make entity-level investments in mostly private US real estate companies so firms can grow to the next stage.