Preqin’s Real Estate Online currently tracks 420 US-based public pension funds investing in the real estate asset class. These organizations hold more than $4tn in assets under management and, on average, allocate approximately 7.5% to the real estate asset class, below their average target allocation of 8.5%.
As shown in the chart above, the largest proportion of public pension funds have a preference for lower risk core private real estate vehicles (77%), although higher risk value added and opportunistic vehicles are favoured by 61% and 46% US-based public pension funds respectively.
In line with their current strategic preferences, 72% of US-based public pension funds will target core real estate vehicles over the next year, compared with 62% looking to invest in private equity real estate funds. In terms of geography, the vast majority investing in the next year (87%) will look to commit capital to opportunities in their domestic market. Thirty-two percent will be looking towards Europe-focused vehicles, followed by Asia- (29%) and global-focused vehicles (28%).
An example of a US-based public pension fund investing in the real estate space in the next 12 months is Arkansas Teacher Retirement System, with $15bn in aggregate assets under management. The pension fund is looking to commit up to $100mn to listed and private real estate funds targeting North America and Europe as it looks to reach its 10% target allocation to real estate.