REAL ESTATE - The University of California has decided to make some changes to its real estate investment program.
The institutional investor has chosen to reduce its amount for core investments and increase its mixture of enhanced and high return strategies. The allocation for core was dropped from 50% to 25% and the range for core from 30% to 60% to 15% to 60%.
The allocation for enhanced real estate has been bumped up from 25% to 40% and the range from 10% to 35% to 20% to 50%. The allocations for high return strategies has moved from 15% to 25% and the range from 0% to 25% to 10% to 30%.
These actions are reflective of what many pension funds are doing across the United States. Many investors are becoming frustrated with the low returns and tough competition for core deals. Many are turning their attention to real estate investments that have less capital chasing them and the opportunity for higher returns.
The University of California also made some other changes to its real estate program. One of these was its increase the exposure to investing in real estate outside of the United States. The old figure was 10%. This can now make up 20% of the private real estate portfolio.
The University of California has been investing in commingled funds so far. These have included placing capital in the Prudential Property Real Estate Separate Account II and AMB Institutional Alliance Fund III.
The University of California will invest in real estate through two entities. These are the University of California Retirement Plan and the General Endowment Plan. The fund for each investment will be split with 90% coming from the Retirement Plan and 10% from the Endowment Plan. The total amount to be invested in real estate for the two plans is $2.5bn.