Public Pension Fund Comparison

RVK Public Pension Fund Universe Analysis

Analysis of Educational Employees’ Supplementary Retirement System of Fairfax County versus a universe of Public Pension Fund Participants

Data through December 31, 2016

Includes capital markets review, asset class reviews and asset class performance

page 13 – Fairfax county has 100% externally managed (like majority of peer group)

page 13 – Active management %  (+90) is higher (ranked #8 overall) than peers (but not the highest of peer group)

 

 

 

ERFC Real Assets Strategic Plan

All commentary below is property of NEPC
NEPC’s Real Estate General Market Thoughts and 2017 Implementation Views
Core/REIT market environment normalized

– Real estate fundamentals (rent growth, occupancy, net absorption) remain strong; however, valuations are high on an absolute and relative basis

– Rising interest rates have been baked into existing valuations but excess cap rate expansion (beyond general expectations) will reset valuations

– REIT sector has been volatile and remain at historically high FFO multiples

• Opportunity remains in non-core strategies

– In the US, we favor managers that are attentive to duration risk at the current stage of the expansion cycle, are focused on cash flow, and may have niche areas of expertise

– Outside the US, Europe remains a relatively attractive opportunity for asset focused managers who are not making macro bets on growth. Current US-dollar denominated investors with currency exposure will feel near-term impact of Brexit, but new investors may benefit from strong US-dollar amidst asset repricing in select cities (e.g. London). Long-term Brexit implications, however, remain unclear.

Strategy Outlook Commentary

Core

Private – 0

Hold to target allocation; focus on quality managers/portfolios in primary locations that should better navigate a downturn

Public REITs – 0

Hold to target allocation; if under-allocated leg into a target allocation to minimize entry point risk; expect high volatility in the near term

Non-Core

Value-Add + & Opportunistic +

Flight to quality will continue to favor US real estate, while opportunities to capitalize on distress or capital markets inefficiencies in Europe and select emerging markets will remain; emphasize more defensible demographically driven sectors vs. GDP driven sectors and watch for “emerging institutional” asset classes with high cash yields

Real Estate Debt +-

Low interest rate environment is challenging for senior loans but mezzanine strategies can offer favorable terms with downside protection

Real Estate Private Equity Secondaries

Due Diligence Report from NEPC on Landmark Real Estate Fund VIII

Report Author: NEPC

Sponsor: Landmark Realty Advisors LLC

Fund: Landmark Real Estate Fund VIII, LP

Strategy: Real Estate Private Equity Secondaries

Date: Report as of November 2016

Fund Target AUM: $2B

Fund Target IRR: 15%

Fund Target Net TVPI Multiple: 1.5x

Highlights from the NEPC report:

Firm founded in 1989;

Over $15B of capital in 1,850 underlying partnerships;

Transacted in first secondary deal in RE sector in 1996;

Greater than $4.1 billion of capital in over 100 transactions, representing 350 different partnership interests.

NEPC believes RE secondaries attractive due to three pillars:

  1. Hyper-diversification
  2. J-curve mitigation
  3. Ability to acquire interests at a discount to intrinsic value

Additionally, NEPC believes growth and acceptance of RE secondaries market is such that opportunity exceeds capital available, leading to supply and demand imbalance which bodes well for investors.

According to NEPC, Landmark’s strong reputation and experience in the industry positions the Firm at the top tier when sellers need liquidity or a recapitalization.