Illinois State Board eyes Europe, Asia

The Chicago-based pension plan expects to make its first commitments to non-US funds this year, allocating $150 million for European and Asian real estate investments.

The Illinois State Board of Investment (ISBI) has approved a plan to allocate up to $150 million per year to Europe- and Asia-focused funds in order to diversify its real estate portfolio, according to ISBI executive director Bill Atwood. The new commitments will mark the $14.2 billion pension plan’s initial foray into non-US real estate markets.
Atwood told PERE that ISBI is looking to make three to five commitments of $30 million to $50 million each for a total annual investment of $150 million to the strategy. The pension plan is likely to use the allocation for non-core investments in order to reach its target portfolio breakdown of 80 percent core and 20 percent non-core.
“The goal is to add some non-US exposure to our real estate portfolio,” explained Atwood. “In all likelihood, the commitments will be to non-core because most funds we’ve seen in Europe and Asia have been in the value-added or opportunistic space.”
Currently, ISBI is looking at closed-ended commingled funds, but it is open to investing in other structures as well. The pension plan will be “relying heavily” on its consultant, Courtland Partners, in order to source the investments, according to Atwood, who noted that ISBI also might explore real estate debt strategies. “We’re certainly open to it,” he said. “Our portfolio is focused on equity but, if the right opportunity presents itself, we’re not going to turn it down.” 
Atwood noted that the revised investment policy, approved at the board’s December meeting, would be reevaluated every year in order to stay on track with ISBI’s overall real estate target, which currently represents 10 percent of its overall portfolio. He added that the pension plan will be “very close” to reaching that target with the new Europe- and Asia-focused investments.
Separately, ISBI approved two new US commitments at its December meeting, allocating $40 million to Morgan Stanley Real Estate’s core, open-ended Prime Property Fund and $30 million to Latitude Management Real Estate Investors’ Latitude Management Real Estate Capital III.