S
acramento County Employees' Retirement System (SCERS) is reviewing its real estate investment strategy, considering a reduction in its target allocation from 9% to 8%. This change would involve lowering the core real estate allocation from 6% to 5%, with the aim of reducing risk and boosting portfolio returns.

    To achieve this, SCERS plans to increase exposure to higher-yielding credit strategies, such as private credit, while decreasing allocations to lower-yielding or more volatile assets. The reduction in real estate holdings would be implemented through redemptions from open-ended funds or secondary market sales of closed-end fund interests.

    The board will make a final decision on 19 March. Notably, the allocation to value-add and opportunistic real estate sectors will remain at 1.5% each. According to SCERS' investment consultant Verus, these higher-risk assets are expected to generate returns 200-300 basis points higher than core real estate.

    Currently, real estate accounts for approximately 6.4% of the $13.3 billion pension fund's overall portfolio. Recently, SCERS committed $50 million to Sculptor Real Estate Fund V, a non-core real estate investment.