Virginia Retirement System (VRS) is investing $135m (€122m) in industrial warehouses with specialist developer Carson Companies.
Carson will co-invest $15m and target properties in South California and East Coast markets between New Jersey and Philadelphia.
It is the second joint venture between VRS and Carson, the first launched in 2010.
Carson will buy existing assets or invest in developments. VRS told IP Real Estate that the joint venture would diversify its portfolio.
Some pension funds in the US are focusing increasingly on development projects in the industrial sector as they can offer better risk-adjusted returns than the acquisition of existing properties. The returns on cost for development projects can produce yields 100-200bps higher than when purchasing a completed and leased asset.
No leverage will be used by Carson, which will target lot sizes between $30m and $50m.
VRS has also committed $100m to a global real estate fund managed by Westbrook Partners.