The Arizona State Retirement System, Phoenix, approved an investment policy for its new $1.26 billion real estate allocation, said Gary R. Dokes, CIO. The $21 billion system will eventually hire 12 to 15 real estate managers, but the money will not be allocated until 2005, Mr. Dokes said. Fund officials expect it to take from one to six years for the program to be funded. According to the new policy, 60% to 80% of the portfolio will be targeted to core real estate, and 20% to 40% to non-core. Within the core allocation, 50 to 70 percentage points will be in private real estate and the remainder will be in REITs and real estate operating companies. Non-core investments — including non-performing loans, mezzanine debt and sector-specific — will be made directly through joint ventures and indirectly through commingled funds. The portfolio's investments will comprise 15% to 45% office properties; 15% to 35% in retail; 10% to 30% each industrial and multifamily; and 5% other properties, such as public storage and manufactured housing. Leverage on the overall portfolio will be limited to 50%, with a 45% limit on core real estate and 75% on non-core. No manager will run more than 30% of the real estate portfolio's market value. Courtland Partners assisted.