UNITED STATES - The Teachers Retirement System of Texas has approved a $150m (€101.2m) into the Fudo Capital Fund II commingled fund, to gain exposure to the Asian real estate market.

The pension fund's investment strategy was to seek Pan-Asian opportunistic, value-added and distressed real estate deals as a key element of its diversification during the current financial conditions. The CLSA Capital Partners fund provides some of that diversity as its holdings will be located in Japan, China, Australia, Hong Kong, Singapore (pictured), South Korea and Taiwan.

Potential property types being considered for investment are office buildings, residential and similar mixed-use assets which combine residential, office and retail, which need repositioning, redevelopment, new leases and refurbishment, so the investors can add value and gain value.

Equity raised so far has reached $815m, and the assets invested in each deal will typically vary from between $25m and $75m but the actual capitalisation per transaction is expected to be much higher as any potential real estate purchase could carry range leverage of between $150m and $200m, or 55-60%.

The projected net IRRs for investors is 16-18% during a four-year investment period and an 8-year life.

None of the money has been invested so far an CLSA will only invest the assets, through local partners, once the exit strategies over a three- to five-year horizon have been clearly assessed and identified.

The Texas Teachers pension fund has now committed $2.1bn to real estate investments in 2009 while the net funded capital of these investments is $904m.

Along with the latest appointment, the $75m for Five Arrows Securities V Co-Investment LP has yet to be called on along with $200m for Ranger Co-Investment Fund LP.

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