UNITED STATES - Pension funds in the United States are investing more capital into commingled funds with opportunistic investment strategies.
Pennsylvania State Employees' Retirement System will commit up to $50m (€35.8m) for the Starwood Global Opportunity Fund VIII while several pension funds have signed up and raised $3bn in equity for the Carlyle Realty Partners V opportunity fund.
Pension funds are said to be are placing additional capital in opportunity funds because it gives them access to real estate they could never own on their own, such as buying land for future residential housing, acquiring large office buildings in New York City with leasing issues or making ‘entity-level' investments in real estate companies.
Pennsylvania State made its decision on the Starwood fund, on the recommendation of its real estate consultant The Townsend Group, as its strategy is to invest in senior housing, residential, retail, land, hotels and corporate ventures.
The Carlyle Group's $3bn fund, meanwhile, has been especially popular US pension funds - $300m came from Pennsylvania Public School Employees Retirement System, $150m from Teacher Retirement System of Texas, $100m from New Jersey Division of Investment and $50m from School Employees Retirement System of Ohio.
One of its key off-market transaction was 92,900 square metres of space in the financial district, by buying the office building of 14 Wall Street in downtown Manhattan.
Robert Stuckey, head of Carlyle's US real estate team, said, "This deal is unique in that we bought it without any bidding war and we can produce additional income by bringing the rents up to market. A factor in this is that vacancy in the market is now at 6.5%," he continued.
Carlyle's commingled fund will invest in a series of additional specialist deals across the hotels and senior housing markets as well as investing in real estate companies.