NORTH AMERICA – The Orange County Employees Retirement System expects to invest up to $200m (€153m) in non-core real estate funds over the next few years.
The pension fund said it planned to make investment decisions with the help of its real estate consultant, RV Kuhns & Associates.
The consultant estimates this amount of capital will be available assuming a 6% annual growth rate for the core real estate funds and REITs in which the pension fund has invested, as well as a 7.25% annual growth rate for the scheme's overall investment portfolio.
Orange County is looking to conduct one new value-add manager search this year, for which it will earmark $50m.
According to a board meeting document, the pension fund requires that each manager have at least $250m in total US real estate assets under management in non-core strategies.
The manager must also have sponsored previous institutional-quality commercial real estate funds.
Orange County is said to prefer investing into a commingled fund that focuses on industrial properties.
As of the end of 2012, it had 10.1% of its portfolio invested in industrial assets versus 15.3% for its real estate benchmark.
The same is also true for apartments, with 16.6% in the current portfolio versus 24.3% for the benchmark.
In other news, Ohio Police & Fire Pension Fund has approved a $45m commitment into the Savanna Real Estate Fund III.
The pension fund stated in an email that the targeted unleveraged IRR before fees was projected to be 18.5%.
Savanna is looking for a total equity raise of $650m for Fund III.
The strategy for the fund, which will allow 65% leverage, is to buy existing office buildings in the US Northeast.
The focus for the fund will be to buy assets in Manhattan.
Ohio Police & Fire invested $30m into the Savanna Fund II in 2010.
The pension fund has $105m of capital left to invest for calendar year 2013.
All of this capital will be invested in the non-core space through commingled funds.
The managers selected will be based on the recommendation of the scheme's real estate consultant, the Townsend Group.
Ohio Police & Fire has a real estate portfolio valued at $1.2bn, as of the end of May.
This portfolio makes up 9.3% of its $3.2bn of total plan assets. The targeted allocation for the asset class is 12%.