The Teachers’ Retirement System of Louisiana (TRSL) plans to invest up to $275 million in real estate during fiscal year 2013, and it intends to continue to allocate that amount to the asset class each year over the next five fiscal years, according to the pension system’s fiscal year 2013 strategic plan, which it approved this week.
TRSL has increased its commitment to real estate from $195.6 million in fiscal year 2012, which ended on 30 June. Real estate commitments in the previous fiscal year included allocations to two core property funds – an additional $100 million and $45.6 million, respectively, to JPMorgan Asset Management and Prudential Real Estate Investors – as well as a $50 million commitment to Walton Street Capital’s Walton Street Real Estate Fund VII.
Louisiana Teachers, which currently has 8 percent of its $13.4 billion in assets invested in real estate, has set a target allocation of 7 percent – divided 4 percent to core and 3 percent to opportunistic – for fiscal year 2013.
The pension system’s real estate portfolio has grown significantly in the past year, with its market value jumping from $795.4 million to $1.1 billion – an increase of more than 43 percent – in the 12 months ended 31 March. That growth resulted from improving real estate conditions and additional paid-in capital, according to TRSL’ annual performance summary.
In a memorandum to Phillip Griffith, the pension’s chief investment officer, and Maurice Coleman, director of private markets, consultant Hewitt EnnisKnupp recommended that Louisiana Teachers’ real estate portfolio become more balanced in future years among investment type. Over the past year, TRSL has increased its allocation to core real estate and recently began investing in a value-added fund recommended by fund-of-funds manager Hamilton Lane.
“The addition of a value-added fund assists in filling out TRSL’s real estate programme further as the structure has been historically barbelled between lower-risk core real estate funds and higher-risk opportunistic real estate,” partner Russ Ivinjack and senior investment consultant Scott Cooprider stated in the document.
Since the inception of its real estate programme in 1994, Louisiana Teachers has committed $860 million to core, $1.28 billion to opportunistic and $400 million to value-add real estate strategies. As of 31 March, some 71 percent of those commitments had been redistributed back to the pension system.