People - FEBRUARY 8, 2013

TMRS searches for new real estate manager

by Sara Kassabian

The $20.1 billion Texas Municipal Retirement System (TMRS) plans to search for a new real estate manager. Approximately $300 million will be allocated to the new manager, which will not replace any current allocations to existing real estate managers. The distribution of the $300 million among managers and styles has not been determined.

A formal RFP was not issued. ORG Portfolio Management, TMRS'S real estate adviser, will lead the search.

Bill Wallace, director of communications at TMRS, says real estate is a relatively new asset class for TMRS, and the manager search is part of the overall process of diversifying the pension fund’s investment portfolio.

In June 2009, TMRS adopted a 10 percent target allocation to real estate, and the retirement system has taken a multi-year approach to implementing this strategy as of December 2012. TMRS has an actual allocation of approximately 1.88 percent to real estate. In the investment policy statement, TMRS says it anticipates it will underperform its benchmark during the early stages of funding this asset class.

TMRS will invest primarily in commingled fund vehicles, with a focus on low-risk investments. A minimum of 50 percent of the portfolio will be allocated to core, with a target allocation of 50 percent to 100 percent in core strategies.  A maximum allocation of 25 percent will be invested in both value-add and opportunistic strategies.

TMRS will invest between 10 percent and 35 percent in office, retail, multifamily and industrial investments. Less than 30 percent will be invested in other property types. A minimum of 80 percent of the portfolio will be invested in the United States.

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