San Francisco Employees Pension Fund Plans up to $700MM in Real Assets Allocations for 2020

By Jon Peterson

As the impact of the global pandemic makes its way through the commercial real estate industry, some institutional investors, including pension funds, are considering ways in which they may be able to find distressed assets to acquire. The San Francisco Employees Retirement System is one such pension fund, and it has set a pacing plan to invest as much as $700 million for its real assets portfolio during the 2020 calendar year. This information was stated by the pension fund in a board meeting document.

The real assets portfolio held by the pension fund was valued at $4.1 billion at the end of 2019. This was split with 60 percent invested in real estate and 40 percent in natural resources/infrastructure.

One of the real assets initiatives for this year would be to deploy capital on potential dislocations in the market resulting from the pandemic/recession. One such strategy would be through real estate debt.

The pension fund has approved a $50 million commitment into the Blackstone Real Estate Debt Strategies IV commingled fund, according to information provided by the pension fund. Blackstone declined to comment when contacted for this story.

San Francisco County is now considering issuing a redemption out of one of its open-ended real estate commingled fund investments, as stated by Bill Coaker, chief investment officer for the pension fund. Should this happen, the pension fund would then become under-allocated to industrial assets within its real estate portfolio. The investor would then look to rebuild its exposure with the property type by making a commitment into an industrial-only commingled fund.

The pension fund is also considering other sector specialists in which it would like to invest more capital, as stated by the investor in a board meeting document. This would include residential real estate and the communications infrastructure.

The investment plans for the real assets portfolio could be achieved through different types of investment structures. This would include commingled funds and co-investments. On a long-term basis, however, with respect to its real estate investments, the pension fund is considering ways in which it can be over-allocated in industrial assets while at the same time remain under-allocated to retail and hotel assets.

West Coast Commercial Real Estate News