California State Teachers鈥� Retirement System (CalSTRS) believes it can maintain its return objectives for real estate over the coming 12 months, despite expecting capital appreciation in the asset class to slow or even stop.
For the fiscal year ending 30 June 2019, the pension fund has an absolute return objective of 7.7% and relative return objective to outperform the core US benchmark NFI-ODCE by 70bps.
According to a board meeting report, CalSTRS expects capital appreciation of real estate assets to slow to between 0% and 3% (last year it forecast 1-3%), while its expectations for income returns remain stable at 3-5%, 鈥渄epending on product type and location鈥�.
This will lead to core real estate returns of 5-7%, it said.
鈥淭he strong returns from our higher-risk strategies should bring our overall returns to 7% to 9%,鈥� the pension fund said.
Core assets account for 67% of the $28bn real estate portfolio, while value-add and opportunistic represent 19% and 14%, respectively.
CalSTRS also plans to evaluate its existing 50 鈥渃ollaborative relationships鈥�, which include fund investments, separate accounts, joint ventures and investments in operating companies.
It said it also plans to 鈥渄evelop a list of 鈥檒ike-minded鈥� investors to potentially purse large transactions鈥�.
CalSTRS was ranked 11th in 91传媒在线鈥� Top 100 Real Estate Investors 2018.
