NORTH AMERICA – The California Public Employees Retirement System (CalPERS) achieved an 11.9% return on its real estate portfolio for the 2012-13 fiscal year, outperforming the NCREIF Open-Ended Diversified Core Equity Index benchmark by 163 basis points.
The return was based on market values through the end of March. Final performance, including the last quarter of the fiscal year, will be available after asset valuations are completed.
CalPERS has a total exposure to real estate of $22.5bn (€17.2bn).
The largest part of this consists of the strategic portfolio, which has $16bn in assets.
This portfolio, which includes assets the pension fund wants to hold on a long-term basis, returned nearly 13.6%, outperforming its benchmark by more than 300bps.
CalPERS increased this part of the portfolio from 55% to 70% of real estate assets over the previous year.
The remaining 30% consists of the legacy assets, which returned more than 5.8% over the period.
This part of the portfolio includes higher-risk assets the pension fund has been reducing its exposure to over time.
Over the long term, CalPERS plans to focus its real estate investment mostly on strong income-producing assets, including office, industrial retail and apartments.
The pension fund wants this part of the real estate portfolio to eventually reach 75%.
It has also worked towards allocating larger amounts of capital to a smaller number of asset managers.
In other news, the Pennsylvania State Employees Retirement System has approved a commitment of as much as $30m into the Hawkeye Scout Fund II.
The investment strategy is to provide growth capital for emerging managers in real estate in the US.
Most of these managers have total assets under management of less than $1bn.
Lastly, the Rockefeller Group raised $250m of equity for its commingled fund, the Rockefeller Group US Premiere Office Fund.
The capital came from nine institutional investors based in Europe and Japan.
There were two other capital sources not considered part of the capital raise: a $250m co-investment into the fund by Rockefeller's parent, Mitsubishi Estate, while Rockefeller itself put $50m of its own capital into the fund.
Dennis Irvin, president at Rockefeller Group Investment Management, said: "After talking with investors, they wanted to make this commingled fund on the small side and not to make the capital raise too big.
"These investors wanted to get a look at what we would actually be buying, and that is why we have spent around 60% of the commingled fund's equity prior to the final closing."
One of the properties already acquired for the fund is the 660,000 square foot 50 Beale Street office building in downtown San Francisco, acquired for approximately $30m.
The other two properties are both located in Washington, DC.
The other targeted markets are Boston, New York and Los Angeles.
"We chose these markets because these areas are the best major markets in the country from a job-growth perspective," Irvin said.
"The recovery in the US is going to be a slow one, and job growth will be a major factor as to how quickly this happens."
The focus of the fund will only be on the purchase of office buildings.
The investment period will run 3-4 years, with the total life for the fund set at eight years.