PSERS boosts private real estate allocation

The $47bn pension has transferred its 1.5% allocation for public real estate securities to private property investments to help cover $3.4bn of unfunded commitments.

The $47 billion Pennsylvania School Employees' Retirement System is temporarily scrapping its 1.5 percent allocation to public real estate securities to make room for $3.4 billion of unfunded commitments to private property funds.

The move will see the pension's private real estate portfolio allocation rise to 10.5 percent from 8 percent, including a general 1 percent allocation increase.

PSERS said it was not terminating its contracts with public real estate managers. “Staff's intention is to retain the contracts of the terminated managers and to re-establish a public real estate allocation in the future once the fund starts receiving net distributions from private real estate,” the pension said in a memo.

The pension has also increased its allocation to private equity to 21 percent from 18 percent to make room for $6 billion of unfunded private equity commitments.

“The [private equity] allocation will increase as the capital is put to work through the next year,” the pension added. The increase will come from a reduction in the pension's public equities portfolio.

PSERS will not be making new private equity commitments any time soon. The pension, which was once one of the most active private equity investors, made only one private equity-related commitment last year, to the Sankaty Middle Market Opportunities Fund, a Bain Capital-affiliated credit fund.

“We have no plans for new commitments at this time, we have sufficient unfunded commitments,” a pension spokesperson told PEO.

Last year, PSERS backed out of millions of dollars of recommended commitments as it battled with a heavily overweighted exposure to private equity. At the time, the pension had an actual allocation of 24 percent, and a target of 14 percent.