The Employees Retirement System of Texas is (Texas ERS) has become more catious on Europe and plans to focus on value-added investments in the US.

In a board meeting document published this week, the $26.3bn pension fund said it would “de-emphasise the region for the foreseeable future” due to “some of the macro headwinds in Europe, including lower growth and political uncertainty”.

Delegates at this week’s IPE Real Estate conference in Munich heard that political risk continues to create uncertainty for real estate investors in Europe.

Texas ERS plans to invest $525m – with the possibility to go up to $787m – in real estate in the coming 12 months, but it will direct most of it to US value-adde funds.

It said it favoured “strategies that are not dependent on the macro conditions, but where the alpha can be generated at the asset level to increase value”.

In Europe, the pension fund will limit its focus to select markets and sectors, including housing in large cities where there is a lack of supply.

Texas ERS said opportunistic and core real estate in Asia remained “compelling due to continued modernisation, global production migration, and increasing spending power of the emerging middle class”.

The pension fund said it wants to continue to diversify its international real estate exposure by investing in Asia-Pacific. It said it was looking at India.

In the US, Texas ERS will focus on gateway and secondary markets for value-added investments.

It also said niche property types potentially offered better risk-adjusted returns today.

The board meeting document also revealed that Texas ERS might consider debt investmnets, which it said “offered income-oriented returns with compelling downside protection and the potential for equity-like returns in certain strategies”.

The private real estate portfolio of Texas ERS is currently worth $1.8bn, representing 6.8% of total assets – just below its 7% target allocation.