UNITED STATES - The Employees Retirement System of Texas has decided to invest all of its targeted allocation for real estate into a global REIT investment strategy.
The $24bn (€17.86bn) public pension fund’s targeted allocation for real estate is in the range of 7-8%, equating to around $1.8bn of capital available to invest in global REITs over a five –year period or roughly $360m annually.
Texas Employees figures this is a good way to achieve a great deal of diversification in a short period of time as investing in Reits allows the pension fund to make investments in a variety of stocks fairly quickly.
Texas Employees will manage the global REITs on an internal basis, as no outside managers are being hired for the strategy, benchmarking its target to the FTSE-NAREIT benchmark focused on global Reits, including publicly-traded real estate companies that with operations in Europe and Japan.
Industry experts believe the Texas Employees’ strategy is a sound one as the faster funding strategy will also give the pension fund a value of its real estate portfolio on a daily basis.
The move deployed by Texas Employees is a unique one for the pension fund real estate industry in the United States as most pension funds, when starting out with a real estate program, have historically tended to invest in private real estate through core open-ended commingled funds.
The next step of most US pension funds is usually to invest in either value-added commingled funds and, if they are large enough, to establish some separate account relationships.
Texas Employees established a real estate allocation in December 2006, but was combined with private equity to create a 15% total allocation. Its remaining pension fund assets are invested in US and international equities, and bonds.