UNITED STATES - Texas Permanent School Fund is hoping to become a major player in real estate over the next four years and invest up $1bn (€686.7m), just as local rival Teacher Retirement System of Texas has appointed LaSalle Investment Management to run a special real estate vehicle specialising in global co-investments.
The Texas School fund intends to invest $230m in 2009, $340m in 2010, $240m in 2011 and $190m in 2012 after establishing a 6% targeted allocation to real estate.
It is expected to start out with a steady core real estate investment strategy. And there are now many core commingled funds in the marketplace which allow new investors to achieve a good deal of diversification in a short period of time.
Some of the pension fund's initial investments are also expected to be directed towards value-added commingled funds where assets require renovation or expansion.
Texas School Fund is now in the process of reviewing the 90 firms that responded to an RFQ that the investor issued earlier this year, with the assistance of its real estate consultant, Courtland Partners.
In contrast, Texas Teachers has just allocated $205m to LaSalle to invest in North American opportunities, but the fund manager will ultimately have a worldwide remit.
Texas Teachers announced earlier this year that it planned to invest approximately $500m in real estate going forward, either through a commingled fund or through a limited partnership where the pension fund was the only investor.
The pension fund has opted for the latter and, more specifically, a vehicle that will look to co-invest in opportunities presented to LaSalle by private equity general partners (GP).
The fund will initially focus on existing relationships within Texas Teachers' current stable of GP fund managers, although it is expected it will at eventually consider investing a portion of the capital into co-investment opportunities with other GPs.
LaSalle said it would seek to build a diversified portfolio of investments based on geography, property type, risk profile, and GP sponsorship.
The fund manager plans to do this by identifying compelling macro-level strategies over the next two to three years.
However, once this has been achieved the new fund may switch to pursuing what it perceives as top performing managers in particular fields or sectors.
Dan Witte, managing director at LaSalle Investment Management said he was pleased his company was expanding its "long-term relationship" with the pension fund.