San Bernardino (Calif.) County Employees’ Retirement Association board changed the allocation ranges for its core and non-core real estate, targeting a greater portion of its 8% overall real estate allocation to non-core strategies, said Don Pierce, investment officer.
The $5.8 billion association’s board lowered the core real estate target to 40% from 55% and increased non-core to 60% from 45%, he said. The split between value-added and opportunistic strategies within the non-core target is 50/50, Mr. Pierce added. The board increased its exposure to non-core real estate because “cap rates are so tight in core,” he said. (The capitalization rate is a measure used to estimate the value of income-producing properties.)
The association will look for non-core managers in the future when opportunities arise, but no RFPs will be issued. Townsend Group is the consultant.
The board also terminated Harris Investment Management, which managed a $100 million active small-cap core portfolio, for performance. It reallocated a portion of Harris’ portfolio to a $110 million smidcap growth portfolio managed by Mazama Capital Management, with the rest going to cash, Mr. Pierce said. However, association executives will not decide the amount of the reallocations until later this month. Harris spokeswoman Amy Yuhn said the firm does not comment on clients or client relationships.
Separately, the board committed $20 million each to two real estate funds: Beacon Capital Strategic Partners V and PRISA II. The board also committed $30 million each to two timber funds: GMO Long Horizons Forestry Fund LP and TimberVest Partners II. It also committed $10 million each to two distressed debt funds: Matlin Patterson Global Opportunities Partners III and Tennenbaum Capital Partners Opportunity Fund V, Mr. Pierce said.
