The Los Angeles Fire and Police Pensions (LAFPP) has approved reducing the target allocation to REITs from 3 percent to 1.5 percent of the total plan, and increasing the target allocation to private real estate from 7 percent to 8.5 percent.
LAFPP believes private real estate offers a better opportunity set than REITs because the pension fund does not require the liquidity benefit that REITs offer. LAFPP expects this restructuring to allow the plan to capitalize on higher returns in the private real estate market while reducing volatility and correlation with public equities.
The pension fund approved changing the private real estate/REITs split from 70 percent/30 percent to 85 percent/15 percent during its Aug. 15 meeting at the recommendation of general investment consultant RVK.
