UNITED STATES - Several smaller pension funds in the United States are thought to be looking to re-enter the real estate asset class, in a bid to diversify their portfolios.
Among the latest examples of this is a move by Bay County Employees Retirement System of Michigan which has now decided to move back into real estate for the first time since the mid 1980s, according to Michael Regulski, financial secretary for the pension fund.
"We chose to invest in the real estate as an asset class again for diversification reasons. It should help broaden our overall investment portfolio," said Regulski.
The pension fund's initial investment in real estate is for $5m (€3.14m) and will be invested through a real estate manager in US public REITs, but this within the bounds of the $230m scheme as state law says the fund cannot invest any more than 5% in real estate and the sum allocated equates to 3%.
Bay County has hired Cornerstone Real Estate Advisers to manage this investment on a separate account basis, and beat tough competition from FAS Advisers, JP Morgan Asset Management and Wellington, following guidance from its Chicago-based consultant, Becker Burke Associates.
The pension fund will be investing in public REITs that own and operate traditional real estate assets such as office buildings, shopping centres, apartments and industrial properties.
That said, this investment in public REITs will not be the only investment made to real estate by the pension fund as Bay County could place more capital in public REITs by the end of the year.
Pension fund sources say the pension fund likes the features of public REITs which allow it to invest capital right away and gain a daily valuation of the real estate portfolio.