ALBANY, N.Y. -- The $120 billion New York State Common Retirement Fund is expanding its allocation to real estate by creating a series of partnerships with leading managers.
The Albany-based fund is close to adding two partnerships, one with Boston Properties Inc. and one with Equity Office Properties Trust. They have been approved by H. Carl McCall, state comptroller and sole trustee, and are negotiating contracts, a spokesman said.
Terms of the deals have not been released.
New York Common, a leader among U.S. pension funds in real estate equity investing with about $3 billion in assets, has a number of partners. They include General Growth Properties Inc. Kimco Realty Corp. and Hines Interests LP.
The fund is "trying to develop strategic partners" to build the real estate portfolio, Mr. McCall said.
He wants the fund to "start partnerships with large players who put up their own money."
He did not give other criteria.
The fund likely will make more changes this year. It's in the middle of an asset allocation study, Mr. McCall said. William M. Mercer Inc., Chicago, is doing the study.
The study's findings will not alter its asset allocation mix radically, Mr. McCall predicted. It will stick to its current 70%-30% split between equity and fixed income, he said.
However, the 50% allocation to domestic equity will be reduced as other kinds of equity increase, he said. "There's less volatility in those markets than in domestic" markets, he said, adding that those markets probably will have better growth than domestic equities.
The move to invest in real estate through partnerships is a way for the fund to get close contact with expertise in its real estate portfolio, said Alan C. Sullivan, a member of the fund's real estate advisory committee. The series of joint ventures are "a good mix" because they include "not just your adviser, but someone in the business every day," said Mr. Sullivan, who is senior vice president with the DeMatteis Organization in New York.
The difficulty with the joint ventures, which vary in size and style, is the time and effort it takes to "hammer out an agreement," said Mr. Sullivan.
The deals range from limited partnerships in which the fund has a 40% stake to ventures in which the fund is the dominant partner.
Funding will come from cash over time and not from a selloff of its current portfolio, Mr. McCall said.
The reduction from domestic equities could be up to five percentage points, leaving it with a 45% exposure. "Once we make the asset allocation decision, we'll let active managers make the tactical decisions," he said.
A spokesman for the fund said it is too early to tell if the moves will lead to changes in money managers.
The fund's current asset allocation is roughly 50% to domestic equities; 26% in fixed income; 11% to international equities; 4% in private equity; 2.5% in emerging markets equities; 2% in equity real estate; 1.2% in global equities; and 1.1% in cash. The remainder is invested in a tactical strategy including stocks, bonds and cash.
