Arizona pension looks to RE for future gains

The state’s public safety personnel pension has also approved new advisory contracts with ORG, StepStone and Capital Dynamics and announced $125 million in commitments to real estate and infrastructure funds.

The $7.3 billion Arizona Public Safety Personnel Retirement System (PSPRS) is looking to increase its exposure to real estate after agreeing to add consultants ORG Portfolio Management, according to a report.

On February 20, the board of the Arizona pension approved recommendations from its investment committee to start contract negotiations with ORG in a bid to boost the plan’s allocations to private equity and real estate.

The board also authorized contracts with advisors StepStone Group and Capital Dynamics, to help PSPRS respectively cover alternative investments in the US and globally.

News of the allocations comes amid a wave of allocation increases across US pensions. For example, California’s state pension fund, the California State Teacher’s Retirement System (CalSTRS), recently announced it has increased its target to real estate to 10 percent from its prior target of nine percent, along with an increase in its private equity target of one percentage point to eight percent.

In 2006, PSPRS announced on its website it planned to increase its allocations to private equity and real estate – which at the time was virtually non-existent – to drive returns.

According to Investment Management Weekly, the PSPRS board also approved committing up to $70 million to Apollo’s real estate Value Enhancement Fund VII and up to $25 million each in Macquarie Infrastructure Group’s Infrastructure Partners II Fund and European Infrastructure Fund III at the February meeting.

The PSPRS board also approved investments of up to $75 million with Apollo Investment Management’s Fund VII and up to $80 million in distressed debt with BlackRock’s Mortgage Investor Master Fund.

To date, RSPRS – which represents retired police, fire fighters, judges, elected officials, and corrections officers – has six per cent allocations to both real estate and private equity, along with 44 percent in domestic equity and 20 percent in fixed-income, according to the report.