UNITED STATES - Washington State Investment Board has decided to boost its real estate allocation from 12% to 13%.
The pension fund has made this move after a one-year asset allocation review of all its investment holdings as Washington State believes real estate will continue to deliver significant diversification benefits and attractive risk-adjusted returns over the long-term.
The pension fund has a real estate portfolio valued at $7.5bn (€5.07bn) to September 30 and total assets in its Commingled Trust Fund of $66.4bn for the same time period, but is making increased incremental exposure to real estate to give existing partners higher capacity to invest in current strategies.
Washington State added to its real estate allocation at its board meeting on November 15, assisted in its decision by Pension Consulting Alliance, EFI Actuaries, Capital Dynamics and the Office of the State Actuary.
At the same meeting, it made a follow on investment with Kitson Evergreen - a Florida-based large master planned residential developer - having first invested $200m in March 2006 but now increasing its approvals to $550m.
Washington State is aware of the financial struggles of the single-family residential market in Florida and around the country but the pension fund believes Kitson is a savvy company and its personnel will be able to produce transactions generating income for the pension fund.
Similarly, Washington State thinks the single-family market has some distressed investment opportunities available.
At the same board meeting, Washington State created a new asset class called ‘tangible assets'.
It will have a 5% allocation, funded by reductions in the fixed income allocation, and will include infrastructure, agriculture and timberland. There is currently no timetable as to how long it will take to fund the full allocation.
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