The California Public Employees' real estate department has insufficient staff, morale is poor, and there are too many advisers, the summary page of a study by PCA/Kenneth Leventhal & Co. states.
The study for the $78 billion California Public Employees' Retirement System, Sacramento, also concluded inadequate strategic management occurs within the real estate program.
The study also cited problems with the adviser reporting system - saying improvement was needed - and said communication between the staff and the advisers needs to be improved.
"CalPERS does not receive the benefits associated with its size in the marketplace," the report stated.
The retirement system's portfolio is in excess of $5 billion.
Roger Franz, the fund's mortgage investment officer, declined to comment, saying the report is an internal document. Chief Investment Officer Sheryl Pressler was unavailable for comment, as was PCA consultant Nori Gerardo.
"Management of the real estate portfolio cost CalPERS approximately $38 million in fiscal 1994," the report states.
"The portfolio is expected to nearly double in five years, with annual expenditures in real estate approximating $75 million annually," the report added.
The report recommends trustees consider these options:
Buy all or a percentage of a real estate management company or real estate operating company;
Create a "captive" private real estate operating company owned by the retirement system;
Enter into joint ventures with one or more firms to create an economic relationship that mirrors an ownership relationship of the firm.