Real estate was the only asset class to make a positive return for the $29.5bn pension fund, however allocations to private equity real estate have now topped 10.5% against a target of 8%.
Jay Fewel, OPERF senior investment officer, said over-allocation and the burden of re-upping with existing GPs will leave little money for any group that doesn’t already have an established relationship with the $54.4bn pension.
The investment firm has acquired a majority stake in the Dubai-based business and intends to expand it regionally.
The $1.7bn pension started investing in real estate just three years ago, however it is now considering increasing its target allocation by 3% and investing in international real estate for the first time. The plan said it was 'shutting off two-thirds' of the world by focusing on the US.
The Canadian pension has set aside an additional C$1.4bn to invest with opportunistic fund managers, and directly, targeting US and UK distressed real estate.
With distributions from real estate funds at a minimum and general chaos in the financial markets, limited partners are struggling to come to terms with the new global situation, according to a conference in London. It does not mean though that the real estate fund management model is dead.
The private equity real estate firm led by Barry Sternlicht is in talks with JJW Hotels to sell part of the Concorde Groupe portfolio in a deal worth around $2bn, according to media reports. The sale would include the Concorde Lafayette in Paris and the Hôtel Martinez in Cannes.
The city will look to invest in domestic infrastructure funds after making an initial investment in the asset class earlier this year and taking a beating in its US equity allocation.
With its real estate allocation currently over target and returns in the year to June just 4.9 percent against a benchmark of 10.8 percent, the $15.7bn US pension says plans to commit $100m to the asset class over the next nine months will be put on hold.
The California pension has committed $400 million to Starwood’s $3bn Global Hospitality Fund II, which is targeting 20% IRRs. This summer, Sternlicht said he was rapidly expanding his latest hotel brand: the Baccarat, based on the famous crystals.