By Muskan Arora
Volatility in the equities market has opened new real estate opportunities for the $55.2B Illinois Municipal Retirement Fund, particularly within the residential sector.
Market volatility is spurring allocators to look for opportunities in new spaces. Real estate traditionally has been a “diversifier, inflation hedge, and an income-generating asset class,” said Angela Miller-May, the IMRF’s chief investment officer, in an email to Markets Group.
IMRF has a long-term target allocation of 10.5% for its real estate portfolio. Miller-May is focused on making investments within the residential, industrial, grocery-anchored or needs-based retail, triple net lease, real estate debt, and distressed real estate sectors. While the sector has also provided non-core and opportunistic returns, she noted that challenges in the broader housing sector are driving demand for the residential rental market.
“The supply/demand imbalance in housing, inflation increasing the cost of materials and labor, higher interest rates driving the cost of debt and making it unaffordable to purchase a home all speak to the tailwinds of renting versus purchasing and the opportunities in residential real estate,” she added.
Recently, the pension fund committed $125M to the Blue Owl Real Estate Fund VII, according to a news update on the plan’s website. The Blue Owl fund is focused on investments in industrial assets (62%), with a smaller portion allocated to office (7%), retail properties (23%) and land (8%). IMRF’s $125M investment targets Blue Owl’s Triple Net Lease fund and strategy. The Net Lease strategy is focused on preserving capital and seeks to deliver predictable cash flows from long-term rents, both of which benefit long-term investors like IMRF.
Additionally, IMRF also committed $175M to its alternatives’ portfolio, with $75M allocated to Khosla Ventures Funds. IMRF’s portfolio is diversified across asset classes, strategies, and managers; however, it also wants to ensure diverse managers have the opportunity to conduct business with the fund, said Miller-May. Khosla, a minority-run firm, represents a broadly diversified investment in venture capital with a particular strength in deep technology.
