Many investors are adding commercial real estate (REITs) to broaden their core portfolio diversification.
David Swensen, CIO of Yale University, recommended REITs for core diversification in 2005, and now Calpers is making a big shift into commercial real estate.
Calpers Boosts Property Investments as Hedge Funds Shrink
Michael Marois, 10/7/14
The California Public Employees’ Retirement System, the biggest U.S. fund, is increasing investments in real estate by about $6 billion within a year as it begins to exit hedge funds.
The $295 billion fund had 8.7 percent in real estate as of July 31. Since then, the allocation has risen to 9.9 percent, and the fund has set a target of 11 percent in fiscal 2016, according to documents posted on its website.
The move is separate from Calpers’ decision last month to pull all $4 billion it had invested in hedge funds, saying they were too complex and too expensive. The divestiture will take about a year and the board hadn’t decided what to do with the money, Chief Investment Officer Ted Eliopoulos said at the time.
Calpers began restructuring its real estate portfolio after suffering a 37 percent loss in 2010, when it wrote off speculative residential investments as property values slumped. As part of the overhaul, the fund has focused on core income investments such as rental apartments, industrial parks, offices and retail space.
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