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Florida RE returns lag benchmark

The $127bn pension fund saw its real estate investments return just 8.7% in the year to June 30, 2008 – against a benchmark of more than 10%. Despite its underperformance, real estate remained the strongest asset class for the pension during turbulent market conditions.

Real estate remained the strongest performing asset for the Florida Retirement System pension fund despite returning less than the industry benchmark.

Revealing an overall loss on investments of 4.4 percent for the year to June 30, 2008, the Florida Retirement System (FRS) Pension Plan Trust Fund said real estate investments returned 8.69 percent against a benchmark of 10.13 percent.

The asset class proved to be the best performing investment for the $126.9 billion (€95 billion) pension, after private equity recorded returns of 7.52 percent and fixed income returned 5.1 percent.

FRS however posted an overall loss during the 2007-2008 fiscal year following weak performances in domestic and international equities.

The turbulence in the market has impacted on the fund’s alternative investments, with real estate breaching its target allocation of 6.7 percent. As of June 30, 2008, real estate accounted for 7.7 percent of the fund’s portfolio, valued at $9.7 billion. In the year to June 30, 2007, real estate generally returned 16.11 percent, with commingled real estate funds returning 15.24 percent, according to documents on the fund’s website. Actual private equity allocations for the same period were 3.4 percent against a target of 3.8 percent, with a value of $4.3 billion.

General Bob Milligan, FRS interim executive director, said despite the loss, the fund was still one of the strongest in the US being 105 percent funded as of the end of June 2008.

In July, the Canadian Pension Plan Investment Board also reported negative returns on its overall portfolio of investments, losing C$303 million ($308 million; €196 million) over the past year. Returns however on private equity and real estate investments remained steady – both reporting returns of 8.2 percent. During the fiscal year 2007, returns were 33.1 percent and 27 percent respectively.