UNITED STATES - Teacher Retirement System of Texas is in the process of setting up two limited partnership funds with assets of $475m (€358.1m) which could make it the only pension fund investor.

One of these investments is with Principal Real Estate Strategic Debt Fund I, as it has allocated $300m to invest in debt such as commercial mortgage-backed securities (CMBS) deals and loans supporting very traditional US real estate.

Texas Teachers is also close to finalising a $175m partnership with Security Capital, a subsidiary of JP Morgan, to invest in debt and preferred equity held by publicly-traded REITs.

These two investing entities are new real estate strategies for the pension fund but will compliment its existing core real estate portfolio, according to Eric Lang, managing director of real assets and private markets for the pension fund.

"It's our opinion that through these investments entities there are going to be some good opportunities in the marketplace. There is now a lack of source of capital for debt. And there is no indication when the traditional sources of capital will be making a return."

Texas Teachers is in a somewhat unique position at present  as the pension fund is less than halfway towards investing its 10% targeted allocation for real estate, when other US pension funds are already over-allocated as a result of the denominator effect in domestic and international equities.

By the end of February, the fund had invested $3.5bn, or 4.7%, of its $70.6bn in assets under management in real estate.

That said, Texas Teachers has yet to allocate a specific sum to be invested in the US this year.

"There hasn't been a targeted amount set for investing real estate in 2009. The amount invested will be based on the opportunities will see in the marketplace," continued Lang.