Massachusetts Retirement Invests $300M in REITs

The Massachusetts Pension Reserves Investment Management Board (MassPRIM) upped its real estate investments by $300 million with two commitments.

Officials allocated $150 million to both DWS Group and PGIM Real Estate. The appointments result from a Request for Proposal issued earlier this year for investment management services for U.S. Real Estate Investment Trusts (REITs). The board was soliciting one or more firms to manage public long-only U.S. REIT portfolios via separate account structures.

The DWS REIT program concentrates on undervalued assets. PGIM’s U.S.-focused mandate employs a value-add investment strategy centered on underlying real estate value and proprietary adjustments, encompassing management’s capacity to enhance shareholder value and pursue external growth prospects.

The meeting materials indicate that MassPRIM investment staff are adopting a cautious strategy regarding the real estate asset class as the year concludes, particularly concerning the office sector.

The favorable returns in the REIT market are perceived by the team as a precursor for private returns, indicating that equity capital is re-entering the private sector. Officials said at mid-year that the decreasing valuations of real estate portfolios were stabilizing, indicating a market bottom.

The allocations were part of the $109 billion pension system’s REIT portfolio, which exceeded the benchmark with a positive return of 5.9% as of mid-year. The gains mitigated the losses in the private real estate portfolio, which, with a return of -7.2%, was the worst performing asset class for the retirement fund.