The San Francisco Employees’ Retirement System (SFERS) is planning to increase its allocation to real estate and put an added focus on opportunistic and value-added strategies.
While a number of other California-based pension plans, such as the California Public Employees’ Retirement System, the California State Teachers’ Retirement System and the Los Angeles Fire and Police Pensions, are joining other institutional investors and sovereign wealth funds in edging away from opportunistic and value-added real estate investments, SFERS is taking the opposite route. The $15.6 billion pension plan recently approved a plan to allocate as much as $400 million to non-core managers for its forthcoming fiscal year.
According to SFERS’ managing director for public markets Robert Shaw, the pension plan has a 12 percent target allocation to real estate. Of that allocation, SFERS currently is investing 57 percent in core strategies and 43 percent in non-core investments. Moving forward, the retirement system intends to up its investment in non-core real estate to 60 percent and lower its exposure to core to 40 percent.
Shaw told PERE that SFERS is doing this in order to pursue higher returns. “We’re finding niches in which there’s a chance for making returns,” he said. “We’re looking to find stuff that’s trading cheap for some misguided reason, buy it, improve it and then sell it.”
The policy shift follows the SFERS’ recent promotion of Lindsey Adams to head of real estate. Adams, who was named senior portfolio manager of real estate earlier this year, has been with the pension system for about three years as a security analyst. Prior to joining SFERS, she worked as a vice president and portfolio manager at AMB Property.
To read more about SFERS’ new real estate investment policy, click here.