The Los Angeles Fire and Police Pension board is considering managing its own real estate portfolio, a rare step for a public pension plan.
The board directed its staff and consultant Townsend Group to study the feasibility of a direct investment arm for its $2.12-billion real estate portfolio, Chief Investment Officer reported. Cutting out third-party firms would benefit the portfolio by eliminating management fees.
It would be an unusual step, as the vast majority in the country’s pension plans invest via third-party managers. Less than 5 percent of Townsend’s clients use internal management.
One exception is the teachers’ retirement system for Ohio, which is one of the top-20 largest pension plans in the country. Approximately 85 percent of its $7.9-billion real estate portfolio is managed internally.
If LAFPP’s $22.3-billion pension fund establishes a direct investment strategy, it would be restricted to U.S. markets, and it would only comprise a portion of the real estate portfolio.
The board also announced LAFPP invested in two additional real estate funds. It committed $35 million to the open-ended Kayne Anderson Core Fund, which focuses on medical offices, senior housing, student housing and self-storage, and another $35 million to the retail-focused Asana Partners Fund II.
In October, LAFPP instructed fund manager AEW Capital Management to buy $100 million in new assets, and sell off older assets in secondary markets this year.
LAFPP serves more than 26,300 members. The system’s rate of return on investment for 2017-18 was 9.91 percent. [CIO] — Gregory Cornfield