NORTH AMERICA – The City of San Jose Police and Fire Department Retirement Plan has approved an expansion of its real estate programme to include value-add, opportunistic, real estate debt and REIT/REOC strategies.
Previously, the pension fund had invested only in individually owned properties.
Ron Kumar, financial analyst for San Jose Police and Fire, said: "The reason for the additional strategies is that it will allow the pension fund to achieve diversification within its real estate portfolio."
The new strategy was part of the 2012-13 real estate plan approved by the pension board on 1 November.
Under the terms of the strategy, City of San Jose's investment consultant, NEPC, will make recommendations based on the information it has on managers in its database.
A traditional RFP process will not be used.
San Jose Police and Fire has 100% of its $126m (€98.8m) real estate portfolio invested in a core strategy, the American Core Realty Fund, an open-ended commingled fund managed by American Realty Advisors.
The pension fund has a 7% targeted allocation for real estate.
The existing portfolio makes up 4.5% of the pension fund's total plan assets – the investor is now under-committed to real estate by $101m.
San Jose Police and Fire is planning to commit a total of $37.5m for real estate in 2012-13, earmarking $12.5m each for value-add and opportunistic, $7.5m for real estate debt and $5m for REITs/REOCs.
NEPC has recommended a long-term targeted allocation of 45% for core, 20% each for core and value-added, 5% for real estate debt and 10% for REITs/REOCs.
In other news, the Alaska Permanent Fund Corporation has approved a new $200m commitment to the purchase of foreclosed single-family homes.
This is a follow-on commitment to the $400m the pension fund allocated for the strategy, managed by American Homes 4 Rent, in May.
Michael Burns, chief executive at the scheme, said: "The board and staff are pleased with the progress American Homes 4 Rent is making in purchasing homes across the lower 48 states for use as rental properties.
"We have confidence in the process they are using, and the board felt at this time that it made sense to make an additional allocation to the programme."
Alaska is looking at achieving a 6% cash-on-cash return using this strategy.
The pension fund is thinking about a holding period that might last 5-7 years.
The purchase of the homes will take place by buying the assets at auctions.
The strategy will involve buying the homes in a number of US markets, including Southern California, Las Vegas, Arizona, Dallas and Atlanta.