Investors - MAY 30, 2013

Texas ERS plans $345 million in real estate commitments in fiscal year 2014

by Sara Kassabian

The $23.8 billion Texas Employees Retirement System (ERS) has outlined a plan to invest up to $1.13 billion in real estate by 2017, according to minutes for the May 21, 2013, board of trustees and investment advisory committee meeting.  

In fiscal year 2013, Texas ERS invested $207 million in three real estate funds, and will be closing on a fourth commitment in the upcoming weeks, bringing its total investments to approximately $280 million.

The investment committee projects investments of $345 million in fiscal year 2014, divided between anywhere from three to 14 deals. Approximately $120 million will be invested in opportunistic funds, $150 million in value-added strategies and $75 million in core strategies. In the near term, the investment committee plans to look for opportunities in Asia and European opportunistic investments.

In fiscal year 2015, the investment committee anticipates $285 million will be invested in three to 13 commitments, with $60 million invested in opportunistic, $150 million in value-added and $75 million in core. If these projections come to fruition, the pension fund will reach its target allocation of 7 percent of the portfolio invested in real estate by 2015.

In fiscal year 2016, the pension fund plans to invest $300 million in value-added investment strategies, through between three and 13 investments. By fiscal year 2017, Texas ERS will taper off its investments, committing $200 million to two to 11 investments, with $150 million invested in core and $50 million will be committed to value-added. 

The investment committee emphasized looking at noncore, value-added and opportunistic investment strategies to help build up Texas ERS’s private real estate portfolio. The retirement system currently has an actual allocation to real estate of 5.32 percent.

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