CalPERS Approves $200 Million for Emerging Real Estate Managers

(August 18, 2011) — The nation’s largest public pension fund has earmarked $200 million for emerging real estate managers with less than $1 billion of assets under management.

CalPERS will target managers who have no more than three prior commingled funds or separate account investment vehicles. About 20 to 50 firms are currently in the universe of emerging managers who might qualify for the new program.

“The Emerging Manager Program is another positive step in restructuring the real estate portfolio. This program will give us several new features including clearly-defined program parameters to provide appropriate and necessary support for emerging managers,” said George Diehr, investment committee chair for CalPERS, in a statement.

The term of the new program will be five years. CalPERS will review the progress and outcome of the program after two years.

When asked whether CalPERS’ decision to target smaller managers was partly fueled by recent evidence that smaller managers tend to outperform their larger counterparts, spokesman Clark McKinley replied:

“CalPERS is not a research organization that has any way of corroborating research about the performance of smaller managers. However, anecdotal experience and what we know of research informs our rationale for investing in emerging managers. When done right, we’ve experienced superior returns from emerging managers in asset classes…Smaller managers are more flexible, can have more focused strategy and offer insights and experience for finding opportunities in underserved or overlooked markets.”