Oregon Public Employees Retirement Fund has earmarked up to $1.1 billion to real estate in 2023, according to the investor’s latest pacing plan.
The Salem-based investor, which has almost $13.4 billion in real estate assets, will look to make between five and nine investments across funds and separately managed accounts. It will commit at least $700 million of capital to the asset class, with individual commitments ranging from $100 million to $250 million in size.
The aggregate commitments under this year’s pacing plan would be a significant drop from 2021, in which Oregon PERF committed $1.75 billion across nine investments. Three of those were re-up investments in existing SMAs and open-ended funds, including an SMA with Abacus Capital Group focused on multifamily and a Harrison Street vehicle focused on life sciences. All 2022 commitments were with managers Oregon PERF had invested with before.
Five of last year’s investments were also focused on core strategies. Oregon PERF takes an income-driven approach to real estate and generated $2.4 billion in cash flow from its property portfolio last year. Over 70 percent of its real allocation is in core private real estate, with the remainder in value-add and opportunistic private real estate and a small percentage – 3 percent – in publicly traded REITs.
Oregon PERF will continue to invest in property sectors that “fulfill portfolio construction needs.” Last year that manifested itself in multifamily strategies or niche property types via Harrison Street’s life sciences vehicle and the Chicago firm’s latest diversified fund, which typically invests in student housing, senior housing, medical office and data centers, as well as life sciences. The investor is underweight in ‘other’ property types relative to the NCREIF ODCE Index, according to the pacing plan documents.
The investor has a long-term goal of reducing its core allocation and increasing both its value-add and opportunistic exposures, the documents showed. OPERF currently has a combined allocation of 20.88 percent to non-core strategies, which is at the bottom end of its policy range. The investor has targeted 20 percent to each non-core bucket, and 55 percent to core strategies over the long term.
The pension plan did not specify how it plans to allocate this year’s commitments by risk-return profile. A pacing graph shows that the value-add portfolio is projected to grow to around $2.5 billion by the end of 2026 from under $1.5 billion currently. The opportunistic portfolio is expected to increase to $2 billion from just over $1.3 billion currently.
Meanwhile, the investor is still searching for its next senior real estate investment officer. Tony Breault, who held the position for 16 years, left last summer to join Ascentris. The Denver-based firm currently manages an SMA for Oregon PERF, with a current value of $584.6 million, according to the documents.