Fed adds PE, RE to pension plan

The central bank made its first foray to real estate and private equity last year as part of an effort to diversify its pension plan.

The US Federal Reserve is diversifying its retirement system through new investments in private equity and real estate.

The central bank shifted some of its retirement system investments into the two asset classes last year, according to the central bank’s yearly statement released on Friday. The retirement system provides funds for employees in Washington DC and nationwide. 

Last year, the central bank shifted 1.7 percent of its portfolio into real estate and 1.3 percent into private equity, slightly decreasing its allocations to equities and bonds. The actual target for private equity as of 31 December was 1.7 percent.

The Fed valued its real estate investments at $214 million and private equity at $157 million, and the entire investment portfolio was valued at $12.5 billion as of 31 December. 

The central bank has invested in two core US real estate funds focused on “high quality, well leased, low leverage commercial real estate” and in a real estate limited partnership that “invests in non-core US commercial real estate including development and repositioning of assets.”

In private equity, it committed to two private equity limited partnerships and to one separate account that all invest globally across various private equity strategies. The names of the general partners were undisclosed.

The Fed hires investment managers for the retirement fund, according to the statement.