Searches and Hires

Arizona State Retirement System wants 3 managers for real estate separate accounts

Arizona State Retirement System, Phoenix, is searching for three managers to run specialized real estate separate accounts with each managing as much as $200 million, building out a portfolio in which a majority of the real estate assets are in separately managed accounts, said Karl Polen, chief investment officer of the $38.8 billion pension fund.

Funding comes from cash. The pension fund as a 10% interim target allocation to real estate; the real estate portfolio totals $3.4 billion.

Pension fund officials are searching for managers, called "sharpshooters" to manage a New York City portfolio, a Washington, D.C., portfolio and a single-family rental portfolio. The searches are being conducted by the pension fund's consultant RCLCO. Interested managers may contact RCLCO.

Pension fund officials are also in discussions with two managers of separately managed accounts to possibly take a stake in their firms, Mr. Polen said. ASRS last hired a separate account manager earlier this year when it committed $150 million to Berkeley Partners, a fully integrated principal investment firm focused exclusively on multi-tenant light industrial real estate. CIM Group runs Arizona State Retirement System's largest separately managed account — a $600 million portfolio.

The pension fund's investment staff has held similar discussions periodically with managers of real estate separate accounts over the past two years, but did not take stakes in those firms, Mr. Polen said.

"It is a natural evolution of the separately managed account discussion," he said.

Pension fund officials have a target of 75% of real estate assets to be invested in separately managed accounts. Currently, 60% of Arizona's real estate portfolio is invested in separate accounts. ASRS officials are looking for separately managed account partners with full-service capabilities, including property construction, leasing and management in their sectors. Pension fund officials retain the right to terminate the investment period, to approve each investment and increase the commitment, Mr. Polen said.