By Muskan Arora
The $56.6B Arizona State Retirement System trimmed its real estate target allocation to 15% from 17%, marking its second reduction since 2022.
In September 2022, the pension plan reduced the target allocation of its real estate bucket from 20% to 17%, noted Cyndi Thomas, managing director at investment consultant RCLCO, during a recent trustee meeting.
To achieve the new target allocation of 15%, ASRS plans to allocate $2.3B across various real estate strategies over the next four years, which would mean $150M in 2025, $625M in 2026, $925M in 2027 and $600M in 2028, based on the recommendation of its investment consultant RCLCO.
As of May, ASRS had $1.5B of dry powder actively invested in separately managed accounts and approximately 85% of the pension plan’s real estate holdings is allocated via SMAs, which has resulted in outperformance “across every time period,” said Mike Copeland, the plan’s private markets senior portfolio manager.
The consultant is bullish on industrial and multifamily strategies and has advised the pension plan to commit $100M to the industrial sector this year with an option to upscale allocations to $300M in the coming years. This would also be dependent on U.S. President Donald Trump’s trade policies.
“We’d like to proceed with caution based on the tariff disruption, and there’s obviously some potential headwinds there,” said Thomas.
The consultant and investment staff will continue to explore new vehicles for healthcare, retail, and industrial sectors going forward.
