MN, which invests on behalf of Dutch pension schemes Pensioenfonds Metaal & Techniek and PME pensioenfonds, has reduced its target commitment amount to US real estate through 2025 from $3.2 billion to $2.7 billion.
“We were confronted with the denominator effect, so we had to lower our total amount of planned commitments to the US,” said Jeroen Reijnoudt, senior portfolio manager for international real estate.
The investor, based in The Hague, invests in real estate both directly and indirectly. Previously, MN was mandated to invest in value-add and opportunistic real estate in the US on behalf of the two pensions. However, no new investments had been made under this mandate since 2008 for PMT and 2012 for PME, and only legacy positions remain in that portfolio. In 2021, the investor was awarded a new mandate to invest in US real estate, but this time with a core risk profile. The commitments it has made to US real estate funds since 2022 are the first in 15 years on behalf of PMT and 10 years on behalf of PME.
Under this core mandate, MN last year committed $410 million to an undisclosed manager, followed in August this year by a $450 million commitment to Nuveen’s open-end US Cities Multifamily Fund.
To achieve the targeted real estate sector weights of PMT and PME, MN is currently in conversation with another US manager around a commitment of $290 million to a residential-focused fund, as well as a $290 million commitment to another multi-sector fund to a separate manager. MN says it is also in the process of selecting its fifth and sixth managers for the US strategy.
According to Reijnoudt, MN decided to lower the US target early in 2023 to avoid the necessity of joining redemption queues at open-end funds for its larger Europe portfolio. “That was something we tried to avoid, and we succeeded in that,” he said.
“It’s still the same amount of activity within the portfolio, because we still need to invest in the same number of funds, but the stakes are a little lower. But if commitments go up again, that’s where we will look first, at building up again in the US.”
He added MN has continued to commit capital in the US this year, owing to the time lag between capital being committed and subsequently called up and invested. “There is still a lot of dry powder within our portfolio that needs to be committed. This gives us the possibility to time the investments in the right way.
“Entering the market at the right moment is very important as a core investor.”
2024 plans incoming
Whether the denominator effect will impact the investor’s plans for 2024 is not yet clear. “The new plans are being discussed this month by our clients,” said Joep Barten, MN’s real estate portfolio manager. “That’s something we’re waiting for. The target real estate allocation hovers around 10-12.5 percent, so that gives us flexibility in the portfolio to tweak things a bit, since we are currently between 8 and 10 percent allocated to the asset class.”
Barten said the investor is “not in commitment mode” in Europe, however.
In Europe, the target allocation for PMT was €3.2 billion through 2025, and this remains unchanged. But for PME in Europe, the target was lowered from €2 billion to €1.7 billion. Both PMT and PME are fully committed in Europe, so with upcoming capital calls and revaluations taken into account, MN expects these targets to be met in 2025.
“We have to get the capital invested, but we’re not in a hurry,” said Barten. “In Europe the focus these days is to get up to speed on the CRREM pathways, and we are talking with our managers about how to improve standards around sustainability and other ESG matters.
“We’re also talking with them about the market, where it is heading, have we reached the bottom yet and are they able to pick up the best deals yet.”
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