US-based public pension funds are major investors in private real estate funds and as of June 2010, the average real estate allocation of such an institution active in private real estate is $1 billion. The average target allocation to real estate is approximately $1.5 billion, while the average allocation to private property funds is $454 million.
73% of US public pension funds that invest in private vehicles have total assets under management of less than $10 billion. 20% have assets of $10-49.9 billion and only 2% have over $100 billion under management. In terms of overall allocations to real estate, 66% have less than $500 million invested in the asset class, 14% have between $0.5-1 billion allocated to property, and 7% have real estate portfolios worth more than $4 billion.
The most favoured fund strategies are value added and opportunistic, with 85% and 63% of US public pension plans committing to these vehicles respectively. Lower-risk core and core-plus funds are also very attractive to these investors, with 62% and 47% showing an interest in such strategies respectively. These funds have recently grown in popularity due to the volatility and uncertainty in the market, with investors reasoning that such vehicles will provide some stability to their portfolios. Debt funds have also grown in prominence and half of all US pension funds investing in real estate have a preference for such vehicles.
In terms of geography, 99% of public pension funds active in private equity real estate invest in North America. The select few that do not commit to domestic funds may have direct property holdings in the US and only utilize funds to access international markets. 49% are interested in European markets and 47% in Asia and Rest of World funds.
More information on private equity real estate investors is available on Preqin's online product, Real Estate Online.