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Los Angeles County Pension Fund Plans To Sell $1B Of CRE

Los Angeles

A major Los Angeles pension fund is preparing to cull its real estate holdings.

The Los Angeles County Employees' Retirement Association is planning to sell off as much as $1B in real estate assets as it attempts to bring the portion of total investment allocated to the sector down to 7%, Chief Investment Officer reports. LACERA ended 2018 with 11% of its capital in real estate, according to its year-end filing.

The move is not a comment on any of LACERA's holdings, but a slight shift in its allocation strategy, Chief Investment Officer Jonathan Grabel told CIO. LACERA will be a net seller for the next two years, but is not removing itself entirely from the buyer pool. Grabel has asked LACERA's board to approve earmarking $500M in order to keep the portfolio fresh with new acquisitions.

LACERA splits up its real estate money with a host of investment managers, with the largest share at 33% going to Deutsche Bank affiliate DWS Group. Its current holdings are a mix of core and value-add properties, which CIO expects to shift more toward the former going forward. Roughly half the $1B in expected sales will likely come from the multifamily sector, CIO reports.

In January, LACERA announced that it would be seeking to invest around $250M in international real estate funds, split heavily between Asia and Europe with a smaller portion earmarked for South America. 

Pension funds are often among the largest capital sources in the real estate market — LACERA has $6.4B in real estate assets out of its $56B in investment, according to CIO, and it is dwarfed by national funds like those of Canada and Japan, and statewide pension funds like CalPERS. Like LACERA, many pension funds eschew digging into the real estate industry themselves, preferring to trust deployment decisions to fund managers or other partnerships.