Orange County Employees Retirement System, Santa Ana, Calif., launched a search for a commingled core-plus real estate fund, said Robert Kinsler, spokesman for the $12 billion pension fund.
The size of the allocation has yet to be determined, Mr. Kinsler said in an e-mail.
As part of the search, pension fund staff and general investment consultant RVK are conducting due diligence with Angelo Gordon on its AG Core Plus Realty IV. OCERS committed $40 million to its predecessor fund, AG Core Plus Realty Fund III, and pension fund officials want to recommit “capital to follow-on funds sponsored by managers who have delivered strong risk-adjusted returns,” a Sept. 24 memo from RVK to the investment committee states.
AG Core Plus III has generated a gross IRR of 18.94% since inception, the memo said.
RVK and staff will consider any other diversified commingled real estate funds that target “a similar risk and return profile” to the AG Core fund, the memo stated. Interested managers should contact RVK.
A selection could be made as early as November.
The search is part of the pension fund's effort to eventually reduce core real estate to 50% from 60% to 70% of the $1.12 billion real estate portfolio given the prices and low yields in core real estate, said Shanta Chary, director of investment operations in a separate memo to the investment committee.
In other action, the investment committee retained its cash overlay program with a zero policy allocation to cash.
Separately, OCERS officials plan to develop a macro portfolio rerisking strategy that would lower allocations to alternative asset classes and put more to into traditional equity at lower fees, “once the economy gets past the next recession,” said Girard Miller, chief investment officer, in an e-mailed response to questions about a preliminary version of OCERS' 2015 business plan.
OCERS has not yet adopted its 2015 business plan.