IMRF to boost RE allocation by $1bn

Illinois’ $38.6bn public pension fund is increasing its commitment to the asset class from 5.25% to 8%. 

Illinois Municipal Retirement Fund is to increase its allocation to real estate by $1 billion, according to documents on the pension fund’s website.

IMRF currently invests 5.25 percent of its capital in real estate, which equates to around $2 billion. Under the new allocation, this would rise to 8 percent, or just over $3 billion.

The Oak Brook, Illinois-based public pension fund added that it was increasing its private equity allocation from 3.86 percent to 9 percent, meaning an extra $2 billion will be committed to that asset class.

IMRF also revealed that it had committed $100 million to Blackstone’s debut core-plus vehicle, Blackstone Property Partners Europe (BPPE), taking its real estate commitments to $250 million this year. In April, the pension fund invested $100 million with Blackstone’s Asia-focused opportunistic fund, while it also committed $50 million to a real estate debt fund managed by US firm Torchlight Investors this month.

The $38.6 billion pension fund now has around $550 million of real estate exposure with Blackstone. After previously investing in the private equity giant’s opportunistic funds, the latest $100 million commitment is understood to be its first lower-risk investment with the New York-based firm.

Anthony Myers, Blackstone’s head of European real estate, made a presentation for the latest commitment at IMRF’s headquarters last Thursday.

Details including target size and market of BPPE have yet to be revealed, but the firm’s US-focused core-plus fund, launched in 2014, hauled in around $10 billion. Core-plus vehicles are typically expected to generate returns of 10-14 percent.

IMRF sent out a request for proposals in June, informing potential investment management firms that it was seeking to invest at least $100 million in an open-ended core or core-plus private equity real estate vehicle.

At present, its real estate portfolio has a $2.1 billion net asset value and around $1.1 billion in unfunded commitments, according to IMRF’s website. Approximately 53 percent of its assets are core with the remainder non-core.

Blackstone has a strong track record in European real estate investing. Its last three pan-European, opportunistic vehicles have collected around €18 billion. Blackstone Real Estate Partners Europe III attracted €3.2 billion; BREP Europe IV €6.7 billion; and it latest vehicle BREP Europe V pulled in €7.8 billion. BREP Europe IV reportedly generated returns of 19 percent, while its fifth fund it targeting a 15 percent IRR and a 1.7x equity multiple.