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Chart of the Week: Current Allocation vs. Target Allocation

Most LP’s are under allocated to real estate

 COW 6-17 411x

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In Q1 2015, PERE Research & Analytics conducted its annual 2015 PERE Investor Perspectives Survey in order to gauge Limited Partner sentiment towards private real estate. In the 2015 PERE Investor Perspectives Survey, PERE Research & Analytics asked investors if they were under or over-allocated to private real estate.

Of the 90 respondents, investors are most likely to be under-allocated when it comes to private real estate at 39 percent. 31 percent stated that they had met their targeted private real estate percentage while 21 percent of respondents chose to invest opportunistically and did not have a specific allocation to private real estate. A small percentage of respondents was over allocated to private real estate at two percent.

With several investors being under-allocated to their private real estate target, some LP’s have developed pacing plans to meet its target in H1 2015. The Arizona State Retirement System, which proposed upping its real estate target from eight percent to ten percent last year, has set aside $1.2 billion to invest in real estate this year. Of that amount, $550 million to $750 million will go to new managers, $100 million to $200 million to close-end funds and $100 million to $300 million to existing separate account managers.

Between now and 2017, the San Diego County Employees' Retirement Association is looking to invest $500 million in real estate between new and existing managers to reach its target of ten percent. The Employees Retirement System of Texas plans to allocate $1.25 billion to private real estate over the next four years. Of that amount, $700 million will be earmarked to non-core property strategies. However, in 2016, The Employees Retirement System of Texas will set its target allocation in real estate sector at seven percent from its current target of ten percent.