Sacramento County Employees’ Retirement System (SCERS) is exploring the possibility of selling its remaining separate account real estate assets in exchange for a stake in a core, diversified fund.
The pension fund made a decision earlier this year to phase out its real estate separate accounts, and its consultant The Townsend Group has been investigating ways to achieve this, according to its latest board meeting report.
Exchanging the portfolio for shares in a diversified fund has been identified by SCERS and Townsend as the “most prudent implementation approach”. It would give the pension fund immediate exposure to a diversified portfolio, avoid a lengthy sales process for individual assets and save on commissions, the report said.
Townsend has surveyed managers of US core open-ended funds to gauge their potential receptiveness and found that “there would be enough interest to solicit the manager universe for a formal indication of interest”.
Invitations were sent out to 17 managers, 13 of which responded. Townsend has suggested a group of seven potential managers for full evaluation, analysis and interviews.
One manager did not respond to the invitation and three elected not to participate since the six assets “did not fit within their fund’s portfolio construction”.
The assets include two apartments in Los Angeles, California, a grocery-anchored shopping centre in Everett, Washington, an office in Seattle, Washington, an industrial property in Houston, Texas, and an apartment in Berkeley, California.
Five of the properties are managed by BlackRock and one by Barings.
Steve Davis, chief investment officer for the pension fund, told IPE Real Assets: “We don’t have a large enough investment staff to oversee separate accounts on a regular basis.
“The total amount of capital that the sale would produce and that we would put into a commingled fund is $250m [€212m].”
SCERS has sought independent appraisals of the assets from Altus.