REAL ESTATE - More US pension funds based are looking at placing capital into international REITs.

Two of the most recent examples of this are State Universities Retirement System of Illinois and the Orange County Employees Retirement System.

Illinois State Universities has decided to transfer $32.5m of a passive REIT account managed by Barclays Group International for an international real estate securities strategy.

This action was taken by the pension fund at its investment committee meeting on December 7th. The pension fund was assisted in its choice by its consultant, Ennis Knupp + Associates.

The pension fund’s Chief Investment Officer Daniel Allen said, "We think that this will give us more diversity within our REIT portfolio." This capital could get placed into the market during the first quarter of 2007.

Barclays Group manages a REIT portfolio for the pension fund valued at $164m. Illinois State Universities has two other REIT managers. These are both active accounts. RREEF oversees a $300m portfolio. ING Clarion runs an account valued at $266m.

The pension fund has a long range goal of having its real portfolio split up with 80% being domestic and 20% for international. It has a 6% allocation for real estate now. This is split up with 4% being allocated for REITs and 2% for direct real estate.

Illinois State Universities will be conducting an asset liability study at either the end of 2007 or early 2008. One of the possibilities is to increase the allocation to real estate. Ennis Knupp has suggested that maybe the pension fund should think about moving the real estate target to 10%. The institutional investor has total assets of $14.99bn, as of the end of October.

Orange County Employees has made a choice to invest up to 15% of its real estate portfolio in real estate securities. This will be the first time it has invested in public REITs.

A portion of the capital could be invested in international REITs. The pension fund’s Chief Executive Officer Keith Bozarth said, "We think that a REIT strategy is a good way to invest on an international basis. The firms that we could invest in are already active in the marketplace."

The amount available to invest in REITs would be $99m. This is based on a 10% targeted real estate allocation. The total size of the real estate portfolio is $660m. Orange County Employees has total assets of $66bn.