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Santa Barbara ponders 10% RE allocation

The $1.7bn pension started investing in real estate just three years ago, however it is now considering increasing its target allocation by 3% and investing in international real estate for the first time. The plan said it was 'shutting off two-thirds' of the world by focusing on the US.

The Santa Barbara County Employees’ Retirement Association is considering investing in international real estate for the first time, as it also ponders increasing its target allocation to the asset class.

Tom Ford, interim retirement administrator for the $1.65 billion pension scheme, told PERE the fund was looking to balance the entire portfolio, which is focused heavily on the US.

The pension was already reviewing its asset allocations and as part of that review had asked its domestic real estate managers, RREEF and Richard Ellis, to evaluate increasing the pension’s exposure to international investments.

“We are shutting off two-thirds of the world,” Ford said, adding that the fund was now seriously considering investing outside the US for the first time.

The pension, which invests through commingled real estate funds, is likely to invest to international strategies as part of a general allocation increase to real estate. Ford said he was “comfortable” in supporting a 10 percent target allocation for the plan, compared to the pension’s current seven percent target. Santa Barbara only started investing in real estate three years ago, he added.

“This is a decision for the board but this is absolutely the perfect time to be investing in international real estate,” Ford said.

Ford, a board member of Sonoma County Employees’ Retirement Association (SCERA) who is working with Santa Barbara while they find a permanent administrator, went on to say that the UK and Australia were presenting some good opportunities amid all the distress.

Real estate though was a good place for institutional investors, amid the volatility of the global equity markets. “Investors are looking for a way to potentially offset that volatility and real estate is one means of doing that.”