Wisconsin to limit RE fund investments

The $104 billion pension plan instead expects to expand its wholly-owned investment portfolio in the asset class in 2014.

The State of Wisconsin Investment Board (SWIB) plans to limit commitments to blind-pool, closed-end funds in real estate in 2014, as part of its investment strategy in the asset class during the calendar year. The pension plan is scaling back on such investments because “we want to more precisely target new investing activity,” a spokesman wrote in an email to PERE

The decision is a noticeable shift from the pension plan’s real estate activity in calendar-year 2013, when it committed to four blind-pool, closed-end real estate funds, including $100 million to TIAA Henderson Real Estate’s CASA Partners VI, a US multifamily fund; $100 million to TCW’s TCW Home Place Partners II, a value-add vehicle targeting single-family home rentals in the US; $52.3 million to Lone Star’s global commercial real estate fund, Lone Star Real Estate Fund III; and $75 million to Hawkeye Partners’ Scout Fund II, an emerging manager funds of funds. Additionally, Wisconsin earmarked a total of $275 million in capital for three open-end core funds.

In 2014 to date, SWIB has made only three real estate transactions totaling $230 million, none of which were in funds. They included a $100 million commitment to a Bentall Kennedy core separate account to buy medical office buildings; an $80 commitment to Wesco IV, a joint venture with Essex Property Trust to invest in apartments on the West Coast; and $50 million to a Bentall Kennedy value-add separate account to acquire medical office buildings.

As part of its 2014 strategy, the state plans to invest with focused operators and strategies and expand its wholly-owned investment portfolio. In a real estate presentation at its board meeting late last week, SWIB also noted that it is pursuing a risk-off strategy in the asset class and will need to consider downside protection; factor in a potential rise in rates; and further deleverage its property investments.

As of year-end 2013, Wisconsin held $5.7 billion in property assets, along with $1.9 billion in unfunded commitments, for a total real estate exposure of 8.8 percent of its overall portfolio. That is up from year-end 2012, when it had a total exposure in the asset class of 7.7 percent.