The Teacher Retirement System of Texas (TRS) has selected AXA Real Estate Investment Managers, the Paris-based firm, for a €135 million mandate to make value-added investments in Europe.
TRS is the largest US public pension scheme and the sixth largest pension fund overall in America with around $120 billion of assets under management on behalf of 1.3 million current education workers and retirees in the state.
Speaking of the success in landing the mandate, Pierre Vacquier, chief executive officer of AXA’s real estate arm, said that it was not just TRS but an increasing number of US institutions that were seeking exposure to “value accretive investment opportunities in Europe”. He added the win was part of a strategy that enabled it to “organically grow a truly global footprint”.
AXA has been contemplating a value-added program in Europe since early last year when the region stabilized. As PERE reported in April 2013, AXA and other fund managers were beginning to see a broadening of interesting deals involving good quality income-producing real estate that nevertheless required asset management to make attractive long-term returns.
However, experts pointed out that, in order to face sovereign, currency and legal risk in Europe, some US investors wanted to see opportunistic returns of 20 percent-plus coming out of the region. Meanwhile, many European investors did not believe these returns were possible anymore.
This has led to some “fudging”. Instead of trying to fit investors into the same opportunistic fund, managers started to think about creating a value-added proposition to appease Europeans. Further, certain firms are opting against operating such strategies through commingled funds in favour of segregated accounts, joint venture or club-type structures.
In today’s announcement, AXA Real Estate’s head of North America, Olivier Thoral, said: “To win this US-into-Europe investment mandate from such a highly respected large scale investor as TRS is a huge endorsement of the progress we have made in establishing our business in the US.” Thoral became head of North America in 2010 after briefly working as head of opportunistic funds.