Two massive institutional investors are looking to deploy more capital in real estate as the economy potentially approaches a downturn, according to a new report.

The California Public Employees Retirement System and California State Teachers Retirement System are both looking to increase their allocations in real estate through large partnerships, IPE Real Assets reports. Between them, CalPERS and CalSTRS control nearly $600B of capital and invest across multiple industries.

CalPERS has committed $3.1B of its $356B across six joint ventures, each with a partner that directs the investments, and CalSTRS plans to allocate 15% of its $236B in real estate, an increase from 13% in 2018, IPE reports. CalPERS and CalSTRS are the two largest pension funds in the U.S. as of 2018.

CalPERS' allocations break down as follows, according to IPE:

• $750M into the $4.1B Fifth Street Partners, a joint venture with Commonwealth Partners focused on core office product.

• $700M into Institutional Multifamily Partners, a $4B joint venture with GID Investment Advisors focused on core multifamily product.

• $500M into GRI, a grocery-anchored shopping center investment vehicle with First Washington Realty.

• $400M into a multifamily investment partnership with Pacific Urban Residential.

• $400M into Institutional Logistics Partners, an industrial-focused fund managed by Bentall GreenOak.

• $350M into an industrial partnership with GI Partners.

CalSTRS didn't specify where its funds would be going, but indicated in July that it was seeking new, large joint venture opportunities, IPE reports. The teacher pension fund's larger emphasis on real estate is reportedly an attempt to reduce exposure to assets that are more sensitive to downturns, like public equity.

Unlike aggressive private equity investments, pension funds are primarily concerned with avoiding risk in their investments, with return a secondary motivation. In the event of a downturn, CalPERS and CalSTRS may be signaling what investments they believe to be best suited for what comes next.