UNITED STATES - Several pension funds in the United States have yet to make any decisions about the activity it will now take regarding previous commitments made to Lehman Brothers-sponsored commingled real estate funds, after the firm today announced it was filing for Chapter 11 bankruptcy.

News of Lehman Bros' Chapter 11 voluntary bankruptcy broke early this morning and global investment markets quickly slumped on the news of its collapse, after the Federal Reserve and the US government this weekend refused to pump money in to keep the firm afloat and a new buyer for its asset management division had not been found, as intended.

The firm had announced last week yet more write-downs and a huge restructuring which was designed to spin off its mortgage-backed and commercial real estate division into a separately-listed entity as well as sell a large chunk of its asset management arm. (See earlier IPE Real Estate story: Lehman spins off real estate after $3.9bn loss)

Officials at Lehman Bros are now in the process of informing all clients of the need to unwind positions, said a spokeswoman for Lehman Bros, but pension funds are likely to be advised its staff are trying to trade as usual where possible at this time.

That said, early indications are the information being provided to company spokespeople is somewhat limited as officials are still referring to "rumours" over the weekend of a potential sale of Lehman Brothers Asset Management and anticipate the asset management arm will still be sold.

The spokeswoman said it is "business as usual" albeit administrators are now in the building and the company is now "winding down", so pension funds and investors whose assets are still held with the firm are now being advised it is attempting the "orderly liquidation of counter-party trades and assets".

Moreover, she claimed those pension funds with derivatives trades "will probably still stand" albeit the risk will need to be taken on by other investment banks.

All pension funds will be hit in some way - directly or indirectly - by developments concerning Lehman Bros as some of the biggest names were either directly invested in the company over recent months or have mandate contracts with their asset management arm.

It is unclear at this stage what the "orderly liquidation" of positions might mean for real estate investors as it is understood the assets held on behalf of pension funds - most notably US pension funds - who have committed to real estate commingled funds will actually see their assets held as private equity under the asset management arm.

"It's my understanding that the real estate commingled funds that Lehman Brothers have fall under the private equity part of their business," said Allison Yager, principal with consulting firm Mercer.

One of the biggest-known investors in a Lehman Brothers real estate fund is the Pennsylvania Public School Employees Retirement System which, to the end of last year, had made a $300m (€212.1m) commitment to Lehman Brothers Real Estate Partners III - a $4-5bn commingled fund which was supposed to see Lehman Brothers make an $800m co-investment into the commingled fund.

Speaking to IPE Real Estate, Pennsylvania PERS' pension fund officials suggested: "The commingled fund is not really impacted as the majority of the capital in the commingled fund comes from other partners, not Lehman. Another factor is that the commingled fund is not part of the real estate portfolio that is going to be moved into a new entity," sources added.

The New Jersey Division of Investment had allocated $100m to Real Estate Partners III earlier this year, but pension fund officials say they are unlikely to make any significant moves at this stage either.

We believe it is premature to judge, what, if any effect the developments at Lehman will have on the Partners III commitment. Only $20m of the original commitment has been disbursed to date.  We will be consulting with Lehman on how to proceed with future disbursements," said officials.

New York State Teachers Retirement System also approved a $100m commitment to Lehman Brothers Real Estate Mezzanine Partners II at the end of January, so pension fund officials say they have received an update from Lehman Brothers officials and will "continue to monitor the situation closely".

We are keen to hear about the impact these developments may have on pension fund capital so if you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com