UNITED STATES - Teacher Retirement System of Texas approved $862.5m (€557.9m) in real estate commitments in April, including one deal which has the structure of a commingled fund but is in fact a separate account.

The most significant of these deals was a $262.5m investment into the Parkway Properties office fund II, which is a separate account relationship even though assets will  fall into the fund.

Rob Kochis, principal at The Townsend Group - which assisted Texas Teachers said "we felt very comfortable with the job Parkway Properties did in its first office building fund as this was done with another Townsend client: Ohio Public Employees Retirement System".

Ohio PERS made a $150m investment in Parkway Properties office fund in 2005.

Moreover, Townsend is conscious of the changing state of the US office market.

"The office market in general is now still pretty solid," said Kochis.

"We do think that there is going to be some downturn in demand because of how the economy is performing."

But this could create investment opportunities in the markets Parkway already operates in, such as Florida, Texas, Phoenix, Atlanta, Memphis, Tennessee and Chicago, according to Kochis.

"Parkway mostly invests in the secondary markets that are showing solid growth.  We think that these areas are going to attract fewer capital than the primary markets, giving the fund some chances to buy some solid assets."

The commingled fund has a core/core plus investment strategy to only invest in existing office buildings.

Parkway is shooting for a 10% leveraged IRR on its transactions but there will be up to 50% leverage placed on Parkway Properties Office Fund II and Parkway Properties will itself make a one-third co-investment.

As well as turning its attention to the office sector, Texas Teachers has also made its first two commitments into infrastructure: $300m each to Morgan Stanley Infrastructure Partners, which has a global strategy, and the US-only Babcock & Brown Infrastructure North America Fund.

These assets should provide a good deal of diversification for the pension fund as infrastructure is typically long-term in nature but requires a great deal of capital to make projects happen.

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