UNITED STATES - The Employees Retirement System of Texas is preparing to make commitments to private real estate totalling $2.1bn (€1.5bn) over the next five years with almost half coming in 2010 and 2011.
This will increase the private equity real estate allocation to the target of 6%.
Texas Employees will be working on a real estate strategy with consultants RV Kuhns & Associates. They both believe that there will be real strong investment opportunities starting in 2010 with the end of re-pricing in much of the US real estate market.
Texas Employees is considering dividing the investments in 2010 across several risk spectrums: Anywhere from two to five investments will be made in a core strategy through either closed or open-ended commingled funds; the balance of the commitments will be made in value-add and opportunity funds.
The pension fund is looking at making large investments with fewer managers in order to benefit from lower fees and other benefits associated with higher levels of capital commitment.
In the latter stages of its real estate program the pension fund may consider setting up either separate accounts or co-investment strategies.
Texas Employees is expecting that its diversified real estate portfolio will deliver a 9.4% return on a long-term basis.
Its entire real estate exposure is through a global REITs strategy. The value of the portfolio stood at $407m at the end of August which meets its target allocation of 2% to public real estate.
This portfolio is internally managed. Its benchmark is the FTSE EPRA NAREIT Index. The portfolio has one-year returns at -35.15% and three-year at -15.22%.