US - There is going to be more interest from US pension funds this year in investing in international real estate securities.
One of the leaders in this trend will be the California Public Employees Retirement System. The pension fund is looking at conducting a real estate manager search for a global investment strategy during the first quarter of 2006. The amount allocated would be in the $500-700m range.
Sacramento County Employees Retirement System is another pension fund that could be putting some capital into this sector soon. It has $50 million to invest in REITs. The pension fund is thinking about awarding this to a manager with a global strategy.
The Alaska Permanent Fund Corporation now has $300m in global REIT investment strategy. It could make some changes to this in 2006.
A manager who hopes to participate in this market is AEW Capital Management. Mike Acton, director of research for the firm, believes many pension funds will be looking at a global strategy over the next 12 months. He said: "We think many pension fund investors will be looking to allocate capital in this sector. This will be especially true of investors with a solid, existing US real estate portfolio."
A main reason for investing in global REITs is to achieve another layer of diversification within a pension fund real estate portfolio. It achieves positions that pension funds would never be able to achieve alone.
Another virtue is that capital will be invested in the market straight away. This is contrary to going the direct private route in the US. Many pension funds are having a hard time finding properties to buy and the capital has to stagnate.