Stephen Culhane Offers Insights on CalPERS’ Increased Investment in Commercial Real Estate in Globe St.
Globe St. reports that the California Public Employees' Retirement System (CalPERS) will be terminating its allocation to hedge funds, instead choosing to increase its allocation to other asset classes, including, in particular, commercial real estate. Because CalPERS is a large and significant fund, this change in strategy has been viewed as a noteworthy, with many in the investment management sector analyzing the factors that may have influenced CalPERS’ decision to diversify.
According to Kaye Scholer Partner Stephen Culhane, Head of the firm’s investment Management Practice, “It was real estate's turn.” He continued, “Institutional investors are always assessing and reassessing their allocations. Commercial real estate valuations are strong and [real estate] is perceived as a safe haven, particularly for non-US and long-term investors."
Culhane also pointed out that commercial real estate can be a better match for a fund like CalPERS, which has long term actuarial funding obligations that can make long-term assets like real estate more appealing than shorter duration investments like hedge funds.