ERS builds real
estate holdingsProperty investments now
make up more than 9% of
the government retirement
system's portfolio
The Hawaii Employees Retirement System's real estate program is on target, ERS consultants said yesterday.
It has benefited from a conservative approach to investment that includes moving away from Hawaii and looking to the mainland to buy properties for rental income rather than profits from buying and selling, they said.
Despite not meeting an initial target, real estate investments have grown substantially in value and are now worth more than 9 percent of the total value of the ERS investment portfolio. That is up from 7.5 percent at mid-year, consultants Jamie Kuster and Ronald Peyton of Callan Associates Inc. told a meeting yesterday of the plan's board of trustees.
The San Francisco-based consulting firm was hired to help the plan -- which represents more than 97,000 city, county and state employees and their beneficiaries -- choose its individual investment managers and report on their performance. Its representatives said the real estate managers' portfolio was intended to be worth 9 percent of the total ERS investment portfolio, plus or minus 2 points, by the June 30 end of the last fiscal year. With the total retirement system's investment at a market value of $7.8 billion at June 30, real estate's share should have been worth as much as $699 million but came out at $586 million, or 7.5 percent of the total retirement portfolio.
But combined with value growth generated from an additional $144 million allocated for real estate after June 30, the real estate portfolio has moved up to $730 million, or 9.4 percent of the fund's total.
"Real estate performed very well. It delivered black numbers (income over expenditure) along with a fixed income," a result desired by institutional investors, Peyton said.
The Callan group representatives said they have worked to improve the quality of the ERS real estate portfolio while keeping it safe. Real estate is intended "to provide less volatility and to act as an anchor to the total ERS fund," the consultants said in their report to the trustees.
The retirement fund has recovered from some stock market-based setbacks, but is still well short of the peak of $9.9 billion in assets reached in 2000.
