CalPERS will look at temporarily dropping its real estate target allocation to 8% until Dec. 31, from its current interim target of 10%, to bring its allocation in line with the portfolio's actual investment, according to agenda materials for the $235.9 billion system's Aug. 15 investment committee meeting.
Now, the California Public Employees' Retirement System, Sacramento, has 7.8% of its assets in real estate. Under the proposal, the target would move up to 9% through Dec. 31, 2012.
CalPERS' new real estate strategic plan is primarily focused on core, cash-generating properties, which are in high demand, according to a memo of the system's real estate consultant, Pension Consulting Alliance. PCA and investment staff are recommending that the system slow down its investment pace while prices are high.
“Given the market demand for real estate, deploying an additional $5 billion in net exposure … (likely $10 billion in gross exposure) at fair prices will take a considerable amount of time,” a staff memo states.
The investment committee also will consider committing up to $200 million to a new emerging real estate manager program. Under the proposal, staff would select existing real estate investment managers with proven track records and certain competencies to select, oversee and mentor the emerging managers. Also, the program would have a California focus, with the emerging managers and the properties located in California. Crosswater Realty Advisors assisted in drawing up the proposal.