Pennsylvania Pension Fund Boosts Real Estate Allocation by $500M

The Pennsylvania Public School Employees’ Retirement System (PSERS), which manages $72 billion in assets, added two real estate funds at its August board meeting.

The board approved a $300 million investment in Brookfield Strategic Real Estate Partners V and a $200 million investment in TCI Real Estate Partners Fund IV LP.

The Brookfield Strategic Real Estate Partners V is the flagship US-focused real estate strategy of Brookfield Asset Management, a longtime manager in the Pennsylvania Public School Employees’ portfolio.

TCI Real Estate Partners Fund IV is managed by the activist hedge fund firm TCI Fund Management. The strategy is a lending portfolio focused on first mortgage and senior secured loans on high quality assets in major cities in North America and Europe.

The $500 million in mandates followed a set of asset allocation changes reflective of ongoing market changes. The overall aim is to reduce net leverage, add fixed income allocations, and continue planned reductions to external investment management fees, according to system.

The fee reductions, totaling an annual estimate of $130 million, are due to the lowering of the private markets target allocation to 30% from 36% and trimming the absolute return target allocation to 0% from 4%.

“Reducing net leverage and making the planned reductions to private markets and absolute return allocations also allows us to simplify the overall asset allocation and reduce risk,” CIO Benjamin Cotton said.