GLOBAL - South Carolina Retirement System is planning to establish its first formal real estate investment strategy.

Until now, its real estate investment portfolio has consisted of the office buildings that it occupies in downtown Columbia and as well as a couple of small apartments in Charleston, South Carolina.

According to industry sources, the pension fund hopes to create the strategy by mid-2011.

South Carolina has a loose allocation for real estate.  The $23bn (€17.3bn) fund includes real estate in its 15% allocation to alternatives.

The pension fund has considered a couple of real estate investment ideas in the past year with its general consultant, NEPC.

One was to invest in core open-ended commingled funds.  The pension fund decided against this as some of the larger funds in this sector have long waiting periods. These commingled funds are JP Morgan Strategic Property Fund and UBS Trumbull Property Fund.  Both of these commingled funds have entry queues of around $2bn each.  If a commitment were made to either of these funds today, capital would not be called for six to nine months.

South Carolina had also considered investing in REITs to ensure that the capital would be invested immediately but NEPC advised against this move, citing the fact that public REITs are too closely correlated to small cap stocks.  As a result no commitment was made.