Preqin’s Real Estate Online service tracks 453 public pension funds based throughout the US and Canada that are currently investing in real estate. The top five pension funds each in the US and Canada by allocation to real estate have aggregate assets under management of more than $1.38tn. On average, these investors allocate 10% of total assets to real estate, below their average target allocation of 12%, but still representing a significant proportion of capital allocated to the asset class.
As can be seen in the table above, the largest investor in real estate as a proportion of total assets is Canada-based OMERS, with an allocation of 26.5%. However, in absolute dollar terms, US-based CalPERS maintains the largest allocation to real estate, with over $25bn invested in the asset class, nearly $6bn more than the largest Canada-based investor, CPP Investment Board.
The top five US-based pension funds have an aggregate $87bn allocated to real estate, compared with $65bn allocated by Canada-based public pension funds. Regarding their preferred routes to market, all of these public pension funds invest both directly and via private real estate vehicles; additionally, due to the large internal resources available to them, all will target joint ventures.
In the next 12 months, these public pension funds will continue to invest in the real estate asset class, either to reach their target allocations or maintain current allocations. In March 2014, OMERS entered into an agreement with Japan’s Government Pension Investment Fund and the Development Bank of Japan to source real estate investments. This formed a part of the Global Strategic Investment Alliance, which would take advantage of Japan-based pension funds’ low allocations to real estate by investing in domestic and international markets.
New York State Teachers' Retirement System (NYSTRS) will make new commitments to private real estate funds in the next 12 months, and will commit between $250mn and $500mn to a mix of existing managers in its portfolio as well as forming new GP relationships. NYSTRS will target funds utilizing opportunistic and value added strategies in regions outside the US.