One of the largest sources of institutional capital in the U.S. is breaking into REITs in a big way.
The California State Teachers' Retirement System has created a $500M investment fund specifically to place money in publicly traded REITs, IPE Real Assets reports.
CalSTRS bumped up its targeted allocation of capital into real estate to 15% overall from 13%; the pension system had 13.9% of its total portfolio invested in real estate at the end of October, National Real Estate Investor reports.
With $246B in total assets under management, CalSTRS is second in size only to the California Public Employees Retirement System as the largest pension fund in the U.S., and its decisions can move the market, a representative from NAREIT told NREI.
CalSTRS has split management duties for its REIT fund between Principal Real Estate Investors and CenterSquare Investment Managers, though RCLCO remains its overall real estate adviser, NREI reports.
Before CalSTRS officially raised its allocation at the end of Q3, its investment was well over its allocation, prompting $2B in asset sales so far this year, the fund said in a board meeting document obtained by IPE. Its real estate investments are nearly always made through managed funds or joint ventures with real estate firms.
Earlier this year, CalSTRS formed a different JV worth $278M with Iowa-based Principal to invest in core real estate, along with a $250M, hospitality-focused JV with Waterton. CalSTRS has also both purchased a majority interest in Fairfield Residential and formed a JV with it this year.
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