Maryland pension cuts REITs out of portfolio

State to pull allocations valued at $786M

May.May 25, 2019 01:00 PM
Nancy Kopp, Maryland State Treasurer and Chair of the Maryland State Retirement and Pension System

Nancy Kopp, Maryland State Treasurer and Chair of the Maryland State Retirement and Pension System

The Maryland State Retirement and Pension System is now the largest pension fund in the country to cut its ties to real estate investment trusts, which is a new trend for state retirement portfolios.

Managers of the $52.7-billion fund announced last year that they would review its strategy regarding allocations to two REITs totaling $785.8 million, IPE Real Assets reported. The system has $4.1 billion in real estate.

Consultant firm Meketa Investment Group said tapping REITs was more helpful when real estate allocations were growing. But that the pension system is now “approaching the 10-percent long-term target allocation and can invest primarily in core and non-core real estate.” The firm did not disclose how the capital from the REITs would be re-invested.

Other pension systems have made similar changes this year to eliminate exposure to REITs. For example, the Massachusetts Pension Reserves Investment Management Board and State Universities Retirement System of Illinois both plan to reinvest capital from REITs into private real estate.

Rising interest rates from last year reduced the relative appeal of REITs’ high dividend payments. But earlier this year The Real Deal reported that REIT shares have soared since the Federal Reserve decided to hold off on more hikes.

Last month, the Los Angeles County Employees Retirement Association announced plans to sell off as much as $1 billion in properties as it restructures its portfolio. [IPE Real Assets]Gregory Cornfield 

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