Alameda County Pension Fund to Invest $250MM Into Real Estate Over Next Three Years

U.S. Department of Commerce’s Economic Development Administration, Sonoma County Economic Development Board Foundation, Santa Rosa,

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By Jon Peterson

Alameda County Employees’ Retirement Association has plans to invest as much as $250 million in real estate over the next three years, according to a statement The Registry received directly from the pension fund.

The reason for this level of investment is that the pension fund approved a new targeted real estate allocation from six percent to eight percent.

The pension fund sees that there are several benefits to providing a boost to its real estate exposure. It stated in an e-mail that it lowers the overall portfolio risk due to real estate’s low correlation with other portfolio asset classes. It generates a stable, predictable income stream that may be collected to assist in meeting cash flow needs. It can provide growth through appreciation and give an opportunity to enhance the portfolio return through higher total return investments. Ultimately, it can serve as a hedge against inflation.

The capital planned for the investment will be split into two major strategies. All of the $125 million capital planned for 2016 will be for core and core-plus commingled funds. The pension fund will be looking to place this capital with either existing managers or new managers with whom it doesn’t have an existing relationship.

Its current list of managers in this space are Clarion Lion Industrial Trust, Heitman American Realty Trust, Jamestown Premiere Property Fund, J.P. Morgan Strategic Property Fund, MetLife Core Property Fund, PRISA managed by Prudential Real Estate Investors and UBS Trumbull Property Fund. Many of these commingled funds have been active buying and investing capital in the San Francisco Bay Area over the past couple of years.

The other planned investment will be through value-add commingled fund commitments. This will be $75 million in 2017 and $50 million in 2018.

Alameda County Employees has a favored investment structure for commingled funds. The pension fund wrote in an e-mail that ACERA’s portfolio is conservatively managed and for the size of the total fund, commingled funds provide broader diversification geographically, as well as by sub-asset class.

The pension fund has a real estate portfolio valued at $479.4 million through the end of September 2015 and total plan assets of $6.5 billion for the same time period.

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