Texas MRS starts real estate investments, eyes 10% allocation

The $16.7bn Austin-based Texas Municipal Retirement System has hired consultant ORG to help it add real estate as a new asset class. Texas MRS aims to allocate 10% of its portfolio to real estate over the next ‘several’ years.

The $16.7 billion Texas Municipal Retirement System has added real estate as a new asset class, with plans to allocate 10 percent of its total portfolio to property investments over the next “several” years.

A pension spokesperson said Texas MRS had hired consultant ORG Portfolio Management to help its foray into real estate. MRS’ board will begin awarding mandates by the end of the year, but has yet to decide how much money it will invest in the asset class.

Created in 1948, MRS is roughly two years into a five-year diversification plan to move away from its almost 100 percent allocation to bonds. As of 31 March 2010, the system had roughly 72 percent of its assets in fixed income, approximately 13 percent in international equities and just under 14 percent in domestic equities.

Aside from the 10 percent target allocation to real estate, the system’s new investment policy – adopted in 2008 – has set target allocations of 35 percent to fixed income, 20 percent each to domestic and international equities and five percent each to absolute return, real return and private equity. The real return allocation may happen this year, according to a pension spokesperson, but the absolute return and private equity target allocations will not be set for one to two years.

The pension had hoped to complete its diversification plan by the end of 2013, but delayed the deadline owing to market volatility and the departure of its executive director Eric Henry in August 2009. A new date has yet to be set. The new director of real estate, Holly Macki, was hired by MRS this March.