Retirement insights from a Colorado PERA perspective

Inside Colorado PERA

Asset Class In-Depth: Real Estate

real estate

Colorado PERA’s asset management focuses on maximizing risk-adjusted investment performance from the broad universe of investable assets. All PERA investment decisions are governed by a Board-adopted investment philosophy and set of beliefs, including the Real Estate Asset Class (See PERA’s Statement of Investment Policy for details.)

PERA separates its Investment Department by specific Asset Classs: Equities, Fixed Income, Private Equity, Opportunity Fund, and Real Estate (additional information on asset allocation can be found in a prior PERA on the Issues post, “Asset Liability Study Plots Course for Future”).

The Real Estate program’s objective is to generate diversified investment returns as well as to provide a steady stream of income in the form of rents to assist in the cash-flow needs PERA has when paying monthly retirement benefits.

Currently, the Board’s strategic target to Real Estate is 8.5 percent, with a range of 5 – 12 percent. Assets at the end of 2017 totaled $4.2 billion (8.6 percent) of the entire $49 billion portfolio.

PERA was an early institutional investor in Real Estate. The first Real Estate investment PERA made was made in 1984. Over the last 30 years, PERA’s investments in Real Estate have evolved and range from being a sole owner of a property to investing alongside other institutional investors in properties around the globe.

The Real Estate Asset Class, while offering diversification for the entire investment portfolio, is broadly diversified by property type as well as geographic location. Property types broadly include industrial, multifamily, office, and retail. PERA has Real Estate investments around the world in countries diverse as Australia, India, and China. PERA’s Real Estate investments are 97.4 percent domestic and 2.6 percent outside of the U.S.

Unlike public equities (stocks) and Fixed Income (bonds) where the price of the investment is publicly known, PERA’s Real Estate portfolio investments are not traded on a public exchange. The PERA Real Estate portfolio’s investments are appraised annually and independently audited before being included in the total return information published in the Comprehensive Annual Financial Report.

The PERA Board receives information on each Real Estate fund investment made and has the ability to access property-level information as desired. This information, while not publicly available, allows Trustees to have detailed information on the holdings within the portfolio. Fund disclosures made to the Board by staff include a fund overview, investment strategy, a summary of key investment personnel, historical investment performance, and fees. In addition, Trustees may request additional information, as available.

For more information on the PERA investment program see these PERA on the Issues posts:

What is a Policy benchmark?

Asset Class In-Depth: Private Equity

Asset Class In-Depth: Fixed Income

Asset Class In-Depth: Equities

A Brief Look at PERA’s Opportunity Fund

Private equityEquity capital that is not quoted on a public exchange. The majority of private equity consists of institutional investors and accredited investors who can commit large sums of money for long periods of time.Fixed incomeSecurities representing debt obligations and usually having fixed interest payments and maturities. Different types of fixed income securities include government and corporate bonds, mortgage-backed securities, asset-backed securities, and may also include money market instruments.DiversificationA strategy of reducing exposure to risk by combining a wide variety of investments within a portfolio.BenchmarkThe performance objective or standard used to define the return against which another portfolio is to be evaluated.BenchmarkThe performance objective or standard used to define the return against which another portfolio is to be evaluated.Asset classA category of investments that share certain characteristics and exhibit similar patterns of return.

Comments

  1. Judy Serby says:

    Do you remember what happened to Norlarco in Florida before they had to sell to PSCU? Don’t tell me this is a good idea. We are heading off the cliff in real estate again…

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