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OCERS earmarks $200m for non-core

The Orange County Employees Retirement System plans to increase its non-core allocation by $200 million over the next three years, starting with a $50 million commitment to KTR’s third industrial fund.

The Orange County Employees Retirement System (OCERS) plans to invest up to $200 million in non-core real estate over the next few years, according to a pacing study conducted by the $10.6 billion pension system. 

With the help of its real estate consultant, RV Kuhns & Associates, OCERS hopes to invest the $200 million in commingled non-core funds focused on the US. A spokesperson for the county pension system explained that the $200 million figure will be reviewed annually in order to maintain the overall real estate portfolio allocation and subsector weightings consistent with OCERS’ strategic plan. The plan also includes a goal to evaluate real estate debt strategies and “implement them if actionable,” according to pension documents. 

The OCERS currently allocates 9.7 percent to real estate, with a 10 percent target allocation over the long term. Non-core real estate investments make up 15.04 percent of the real estate portfolio, though the pension system has a long-term target of up to 30 percent.  

As a part of the $200 million non-core increase, OCERS recently made a commitment to KTR Capital Partners Industrial Fund III in order to boost its under-allocated industrial sector. As of March, 11.2 percent of OCERS’ real estate allocation was devoted to industrial properties, but the county pension plan is targeting up to 40 percent for the sector. OCERS’ real estate performance report for the first quarter of 2013 noted that the pension’s real estate portfolio is under-allocated to the apartment sector as well, while it is over-allocated to retail. 

KTR’s Fund III held its final close in August on $1.2 billion. The value-added vehicle will acquire, develop and operate industrial properties in North America. Among the fund's other investors are the North Carolina State Treasury, the Ohio Bureau of Workers’ Compensation and the Employees Retirement System of Texas.